Posts tagged 'China'

Your new (improved?) Chinese GDP

What you think of the new one will probably depend on what you thought of the old one. For many people “not much” seems inadequate.

From Capital Economics’ Mark Williams on the likely Tuesday announcement of an upward boost of up to 10 per cent to the Chinese government’s estimate of the size of its economy (our emphasis): Read more

“必有牛市” – “There must be a bull market”

You’ve read about the scope for a dynastic bull market in the Economist… now read the report. If you can read Mandarin, like P/E ratios and have a good feel for Chinese imperial history that is.

Do click through the below for the pdf from Cinda. Joseph Cotterill, our resident Mandarin translator, assures us that it’s a chart of the last two millennia of order and chaos in China… which is nice: Read more

China’s changing monetary policy, charted

Some cut out and keep from Morgan Stanley:


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China’s “new 4 trillion stimulus” and its collateralised weight

Biggest fall in five years that, even if it’s still up 35 per cent this year. Might be time to talk about the potential consequences of all this, no? Read more

China’s equity frenzy: putting easing on hold?

Nice from Simon Rabinovitch at the Economist:

One middle-aged man, Mr Xu, had come to meet a manager to inquire about how to subscribe to initial public offerings; their average first-day gain has been about 40% this year. He said he had taken the afternoon off work for the meeting and could hardly conceal his glee. “I’ve been trading since 1992 (just two years after the Shanghai Stock Exchange was established) and I guarantee you this bull market will last,” he said. He confessed to getting badly bruised by the last big one – his portfolio of 500,000 yuan had swollen to 3 million yuan by 2007 at the peak of the market, before falling back to its original level.

At the other end of the spectrum in terms of experience was Ms Zhou, 25, an interior designer with dyed-blonde hair. Like many other young professionals, she had previously put a big chunk of her savings in an online investment fund marketed by Alibaba, an e-commerce company. The fall in interest rates has reduced the return on that fund, pushing her to look for alternatives. “I had been thinking for a while about buying stocks but I had to travel for work and missed the best opportunity,” she sighed. “I will be conservative at first. Just one or two thousand yuan. Or maybe ten thousand.”

Which says a lot about the mechanical nature of this “super-bull” run. There’s simply quite a bit of money in China and a limited number of places for it to go. Once one is found… Read more

Your Shanghai equity “frenzy”

And in the Shanghai Composite, from Fast, “as of 2:34pm in Hong Kong, turnover today is already $91.4bn, a record high according to Bloomberg data going back to 2005.”

Blame retail, blame leverage but don’t, as already mentioned, put too much weight on the Shanghai-Hong Kong Stock Connect scheme — uptake has been light and the timing is off. It’s up to you how much weight you put on that rate cut in late November. YEAH the equity rally got off the ground well before the rate cut with the Shanghai Composite up by 23 per cent between the start of June and 21st November, more than any other major equity market. BUT shares have also gone up 17.5 per cent since the rate cut so it’s obviously part of the story.

But to get back to the more important retail, leverage stuff…. Read more

China’s levered stock market

Consider this from Gavekal’s Chen Long on the run up in China’s A-shares:

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They yuan a war?

Clearly there are incentives for China to join the currency wars in earnest.

The RMB is up 6 per cent in Nominal Effective Exchange Rate terms since August 2014 with, say SocGen, the JPY, EUR, KRW and RUB the top contributors, accounting for 1.9pt, 1.3pt, 0.5pt and 0.4pt of the appreciation respectively. Honourable mention to the USD, naturally, against which the RMB is up 0.5 per cent.

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But… weren’t my deposits already insured? Yours, an average Chinese depositer

Well, kinda. Or that was the assumption ever since the closure of Hainan Development Bank in the 1990s, when household deposits were made whole courtesy of the fiscal chequebook and an implicit guarantee was born, at least.

But as of Sunday night there is the beginning of a delineation as the PBoC published its draft plan for setting up a real deposit insurance scheme in China. The highlights from Bernstein: Read more

I see currency wars

The first rule of currency wars is: you always talk about currency wars.

The second rule is: you can always find one to talk about if you look hard enough.

This month’s FX war location of choice is Asia, and here with its proximate cause is BNP Paribas (our emphasis): Read more

Wriggle room, the CNY, and the PBoC

More on that Friday PBoC rate cut — and just as China goes ahead and cuts its 14-day repo operation rate by another 20bp to 3.20 per cent too. That move on Tuesday, according to Nomura, suggests that the PBoC will continue to ease monetary policy… which would be true to form.

As Barc note, “the policy rate cut suggests that China is once again following the typical sequence in a monetary easing cycle – the pace of CNY appreciation is often slowed in advanced, followed later by the same directional moves in the policy rate and banks’ required reserve ratio.” Read more

Signal vs noise from the PBoC

Indeed, nobody expects the PBoC…

But, despite Friday’s surprise announcement, as SocGen’s Wei Yao says: “due to the further rate liberalisation announced at the same time, there is actually no de facto rate cut.”

She continues, (with our emphasis): Read more

No-one ever expects the PBOC

The People’s Bank of China likes to act unexpectedly. And Friday’s surprise announcement of a Chinese rate cut only confirms that being unexpected is indeed the PBOC’s preferred communications strategy.

As Reuters noted, this is the first Chinese rate cut in two years and lowers the benchmark lending rate by 40 basis points to 5.6 per cent. One-year benchmark deposit rates were lowered by a smaller 25 basis points.

But, as Marc Ostwald at ADM Investor Services International commented in an email, the timing of this move looks to be as much about the sharp appreciation of the Chinese currency versus the yen as the fact that China’s economy is experiencing difficulties, with both Chinese CPI and PPI remaining very benign. Read more

China’s still leaning towers

Rumours of stabilisation in China’s property sector abound…

From UBS’s Wang Tao (our emphasis):

New property starts leapt up by 43%y/y in October reversing September’s marginal 0.2%y/y decline, as sales narrowed their pace of contraction from 10.3%y/y previously to 1.6%y/y…

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Can 1980s Europe really tell us anything about Chinese SOE reform?

State Owned Enterprise reform optimism in one chart, courtesy of Bernstein:

And here’s at least part of its foundation:

While investors can get impatient with the pace of change, it is worth pointing out that corporate China today looks similar to pre-privatized Europe of the 1980′s.

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Xi who must keep you employed

This man is in charge of China. Like, really in charge:

And he wants to make sure everyone he’s in charge of remains nice and calm. So he’d like them kept busy. That, for the most part, means they should be working — call it a social compact or call it a security measure, it doesn’t really matter. Read more

What ails StanChart — spot the difference

In the first quarter:

By the third quarter… Read more

Abusing the Li Keqiang index?

A sad demise or just an over-hyped concept from its Wikileaks conception? Either way, the below is sensible stuff from Gavekal’s Chen Long and Andrew Batson on analysts’ favourite growth proxy for waning Chinese growth. Read more

Beware the Chinese FX reserve fall

The latest from SocGen’s Albert Edwards features this eye-catching chart:

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Chinese deposit growth, but not as we knew it

Chart du jour from BCA Research:

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Update: moles still largely unwhacked in China

If there’s one sure bet in China it’s that money, uh, finds a way and that shadow banking (or whatever less objectionable name you wish to apply) will do its damndest to help. Otherwise, what’s the point?

In this episode, crowd funding. Read more

Regressing to the mean in China or why if something cannot go on forever, it will stop

With a h/t to Marginal Revolution, here’s Larry Summers and Lant Pritchett on why — for the same reason the USSR didn’t overtake the US, and Shinzo Abe has a tough job on his hands — “excessive extrapolation of performance in the recent past and treating a country’s growth rate as a permanent characteristic rather than a transient condition” is a bad idea.

Most particularly where China is concerned. Read more

More on the overvalued renminbi

For a couple of years now we’ve made the case that the Chinese currency isn’t undervalued as many people believe, but rather, overvalued — especially, once all the other fundamentals are considered.

But, of course, the mantra that the Chinese renminbi is being repressed by the government is so ingrained in investor consciousness, it’s the sort of “whacky” out of the box thinking that tends to draw sceptical denial.

In the last few days, however, a number of analysts seem to have realised that something has changed in the nature of global capital flows, which may mean views that were taken for granted for years no longer really apply. Read more

Skids under Zhou Xiaochuan?

Sometime tennis partner of Larry Summers and People’s Bank of China governor Zhou Xiaochuan looks to be on the way out, according to a detailed WSJ report.  Read more

Slowly, very slowly, getting China’s house in order?

Oh look, China’s property market has worsened again:

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SOE you think you can reform, the optimists’ roster

Evidence of something — even if it’s not necessarily reform — from Deutsche:

Noteworthy announcements about SOE reform and deregulation have appeared about every two days since the Third Party Plenum in November 2013…

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China’s anti-corruption trillions

Some thoughts from Nomura a little while back on where exactly all of this anti-corruption cash being swept up in China on the orders of Xi Jinping might end up.

Potentially, in the coffers of local and central government:

Our anecdotal checks reveal that for cases involving cooperation among various local and central governments, distribution of any recovered funds has largely been based on negotiation among the governments involved.

… a billion here, a billion there

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All about the eurodollars, China edition

There’s an abundance of dollars in the Eurosystem with nowhere useful to go.

We think, as we argued earlier, this is down, at least in part, to the Fed busting apart the money-market arbitrage for non-FDIC insured foreign entities.

In any case, note the following chart (via the Bank of England) of the euro/dollar cross-currency swap, which shows how much cheaper dollars in Europe got since reverse repos kicked into action in September 2013 (the nearer zero the cheaper dollars are):

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iPhone 6, the GDP effect

Can just one product deliver a 1 per cent boost to Chinese export growth?

If that product is Apple’s iPhone 6, then potentially yes.

So says BoAML’s China Economist Ting Lu, who presents the iPhone 6 case for Chinese exports as follows (our emphasis):

Though iPhone is an American product, it’s assembled in Mainland China (henceforth China) and all iPhones, except those sold in China, and are counted as China’s exports. The iPhone 6 is also important for Taiwan because the economy provides a significant amount of iPhone components including producing processors.

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More on the US-China bilateral trade balance

As a brief follow-up to yesterday’s post on the impact of US trade with China on US employment and incomes, we thought it would be useful to visualize a few interesting facts about the evolution of the bilateral trade balance over time.

First, look at how the deficit in the trade of goods swamps the modest surplus in the trade of services. Whilst the data on services are annual and stop in 2012, the general picture would probably not look much different even if it were more up to date: Read more