So far yesterday’s China leakers are one for one.
Yesterday Reuters reported that according to three unnamed people a government official had told an investment conference that May consumer prices rose at an annual rate of 3.1%, exports jumped 50% in the month, and new loans totaled $92 billion. (For more on yesterday’s leak see my post https://jubakpicks.com/2010/06/09/leaked-numbers-enough-to-diminish-fears-about-chinas-growth-for-a-day-or-two/)
Today, June 10, we’ve got the first official version of any of those numbers and the leakers are batting 1.000. Exports gained at an annual rate of 48.5% in May, according to China’s customs bureau. That’s awfully close to the leakers’ 50% and far above the 32% median estimate of economists surveyed by Bloomberg News before the data release.
If you were worried about economic growth in China falling off a cliff, you can take a provisional deep sigh of relief on today’s export number.
But the news isn’t as good on the other worry front—the potential for an asset bubble.
Official numbers on housing prices for May show that the government’s efforts to rein in speculation in the real estate market haven’t gained much traction. Â
Real-estate prices rose at an annual rate of 12.4% in May.
May’s 12.4% rate is the first decline in the annual rate of price increases in 11 months. But that’s not saying a whole lot. April’s 12.8% annual rate was an all-time record for government housing price data that goes back to 2005. And a drop to a 12.4% annual rate isn’t much of a decline considering the intensity of government efforts to slow prices that include lending restrictions and new limits on mortgages.
The export numbers don‘t guarantee that China is out of the woods on economic growth. The percentage gain in May 2010 was so high because exports in May 2009 were so depressed. And the results probably don’t fully reflect the slowdown in Europe’s economies as a result of the euro debt crisis.
 Economists are increasingly divided on their projections for China’s GDP growth in 2010. In the first quarter China’s economy grew at an 11.9% annual rate. Some economists are predicting that the full year will show only a modest drop from that rate with growth for 2010 coming in near 10%. Others are expecting growth in coming quarters to decelerate rapidly with growth for the full year coming in at 7.5% or so.
What’s that saying about financial markets hating uncertainty?
Jim:
Have you looked into Africa? A $1 trillion market capitalization with low correlation of returns to developed and emerging markets that is largely being overlooked. Would love to share our data with you explaining what investment opportunities that we see.
According to Bove, the well-known banking analyst, BAC is facing serious challenges, partly due to the financial reform:
http://wallstnation.com/BAC-Bove-downgrade-06-072010
One consideration is that the CP can legislate affordable housing be built and limit the luxury end. That’d skew the average lower, something the market desires. Is foreign capital wagging the Chinese dog here?
jamba,
I can’t speak to what is going to be in the final version of the financial reform bill, so it becomes even harder to say what impact it will have on the markets.
I would speculate that it won’t do much harm to larger investment banks, since some of the largest political contributors come from the large investment banks.
I will say I’m avoiding the financial sector for now.
Like most statistics, the most useful information is that below the headline number. 12 of the 70 cities covered by the statistic had price declines of up to 0.6% from the previous month, including Beijing, Nanjing, Hangzhou and Guangzhou. The biggest price increases were in Hainan, an island being developed as a tourist destination, where the annual price increase exceeded 50%. http://www.businessweek.com/news/2010-06-09/china-property-prices-rise-more-than-estimated-12-4-update2-.html
It looks like the measures taken so far have stalled the rate of real estate in at least some of the major cities.
Jim, Chinese like real-estate. if you look at HK, Singapore & Taiwan, then you know. The housing in hk , singapore, taipei are just like New York. You get the idea.
Where are all the U.S. deficit hawks who dread inflation in the States but gloss over it when it occurs in China?
As I see it, inflation is most advantageous to a debtor with fixed interest rates, most painful to those living on fixed income. It’s effect on creditors, landlords, and other producers depends on how they’ve drafted their contracts.
Jim: how do you read inflation as affecting your China picks? e.g., I’m rather curious about the terms of those China Life policies…
> One more thing: dow up 2 & some change (yay) will it hold? (groan)
The day is still young. There are 44 countries in Europe, countless deep water oil rigs, and finally, a lot of people with fat fingers.
Jim or Ed,
If the financial reform bill passes the senate what effect will it have on banks and the stock market in general?
One more thing: dow up 2 & some change (yay) will it hold? (groan)
My second reference to the Sound of Music in a week…hmm: “How Do You Solve a Problem Like Maria?” Well, if I were artsy-tartsy this AM (and I’m not…at least on China) I would be trying to rewrite lyrics to the same tune about China. Maria didn’t make it to the convent…hard to say how China will make out. One thing is for sure: China’s government is trying its best to keep its hands on the controls. Can anyone hum another tune?