China Bubble Analysis

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Not the right way to manage the new China
2007-10-22 19:03:00
From Live MintThat China has leaped forward is plain. Communist poverty has been replaced by capitalist ambition. The world is acquiring a second superpower. Yet, politically, little has changed. The Communist Party remains the same. And in this mix of extraordinary economic vigour and political stasis lies danger.The five-yearly congress of the Communist Party, now being held in Beijing, is demonstrating that stasis all too well. The men in grey suits yawn their way through speeches about greater democracy and President Hu Jintao’s pet notion, “the scientific theory of development”. The lively business will be behind the curtain as the rivals to succeed Hu five years from now court favour.For investors, the question is whether this ideologically bankrupt and obsessively secretive organization can manage a modernizing economy. It is certainly trying, in an old-fashioned autocratic way.A crackdown on dissidents preceded the congress. The award of a medal to the Dalai Lama was s...
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China may use more, bigger rate moves to curb cash
2007-10-19 19:04:00
From India TimesChina will step up measures to curb excess cash in the economy and may use more or bigger rate increases to prevent overheating, central bank chief Zhou Xiaochuan said. “We don’t rule out steeper or more frequent moves if necessary,” Zhou, governor of the People’s Bank of China, said during an interview with reporters on Thursday at the Communist Party Congress in Beijing. Controls so far “haven’t been very effective”. The bank will keep using a mix of policy tools, including rate increases, higher reserve ratios and more bill sales, he said.The central bank is concerned with rising asset prices though that isn’t the sole driver of monetary policy, he said. The world’s fastest-growing major economy has doubled in size since president Hu Jintao succeeded Jiang Zemin five years ago. A surge in exports that helped drive growth now threaten to derail the expansion by flooding the economy with cash, stoking inflation and a possible stock market bubble.Th...
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Investors Expect Beijing To Mind Stock-Price Gap
2007-10-19 19:03:00
From The Wall Street Journal Stock s in Shanghai and Shenzhen fell sharply Thursday while Hong Kong shares rose, as investors bet that Beijing officials would take steps that close the large gap between prices of Chinese companies listed in the different markets.Triggering the share movements in part was a report by Bloomberg News that quoted China Securities Regulatory Commission Vice Chairman Tu Guangshao as saying the agency was studying how to introduce ways for investors to earn money based on the price differences between the markets, or arbitrage. Later, Jiang Chaoling, chairman of Shanghai-based Bank of Communications Co., told reporters his bank has been consulted about just such an idea.After the end of trading Thursday, a CSRC official said the original Bloomberg article was misleading without elaborating. An article on Bloomberg's Web site Thursday night reported that Liu Fuhua, a spokesman for the regulator, said Mr. Tu "misspoke" and declined to confirm whether such a ...
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Are Global Investors Flying Too High?
2007-10-19 19:00:00
From TimeMarket bubbles are not obvious when they are occurring. Even former U.S. Federal Reserve Chairman Alan Greenspan says he's unable to tell for sure when exuberance becomes irrational. While being questioned before Congress a couple of years ago about the 2000 tech-stock meltdown, Greenspan famously said: "As events evolved, we recognized that, despite our suspicions, it was very difficult to definitively identify a bubble until after the fact — that is, when its bursting confirmed its existence."In other words, investors sometimes find themselves driving down treacherous roads with only their rearview mirrors to guide them. This is a particularly discomfiting thought right now, when the word bubble is being bandied about to describe emerging markets. Stock markets from Mumbai to Shanghai have been hitting record highs with giddy regularity recently, in spite of dangers such as the murky outlook for the U.S. economy. The CSI 300, a benchmark index for China stocks, has nea...
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Fears of housing crash in red-hot China economy
2007-10-19 18:58:00
From The Sydney Morning HeraldSWEATING in the bright afternoon sun, the men and women stand on the sides of the roads like homeless people clutching wrinkled cardboard signs. Waving the boards, the real-estate agents call out to cars zooming by."Come take a look.""You're welcome to visit.""Over here."Surrounding the agents in this upmarket neighbourhood are swathes of empty apartments that a few months ago were selling for record high prices.The housing market in this city of 14 million adjacent to Hong Kong is among the first casualties of China 's efforts to cool an economy it fears may be overheating.Faced with surging inflation, shaky loans and a stockmarket bubble that has grown by more than 400 per cent in two years, the Chinese Government in recent months has been pulling all the policy levers at its disposal to control growth.Ther central bank has raised interest rates five times this year and increased reserve requirements for commercial lenders eight-fold. Last month the ...
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Additional Sponsors Join Adam Friedman Associates China Growth Conference,
2007-10-19 06:08:00
From BusinesswireNEW YORK--(BUSINESS WIRE)--Adam Friedman Associates (AFA), a leading New York-based communications consultancy specializing in investor relations and financial communications, announced that Continental Airlines, Investology, and Sterne Agee & Leach, Inc. will sponsor the Third Annual China Growth Conference, to be held Wednesday, November 7, from 8:00 a.m. until 5:00 p.m., at The Princeton Club, 15 West 43rd Street, in New York.The newly added sponsors join Business Wire, The Chinese Investors Association, Inc., Crone Rozynko, LLP, and InvestorCom, Inc. in sponsoring the event.A select group of Chinese companies will present to an audience of over 250 investors specifically interested in Chinese investments. The program will also feature speakers who will discuss the investment opportunities and challenges of investing in China.Presently, those presenters include: Benda Pharmaceutical (OTC BB: BPMA), China Aoxing Pharmaceutical Co., Inc. (OTC BB: CAXG), China A...
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China planning to reform Exim Bank into a commercial bank - Xinhua - UPDATE
2007-10-19 06:06:00
From ForbesBEIJING (XFN-ASIA) - The Chinese government, led by the central bank, is still in the process of drafting a plan to allow the Import-Export Bank of China (Exim Bank), one of the country's three policy banks, to be restructured into a commercial institution, said the official Xinhua news agency, citing bank president Li Ruogu.Li said on the sidelines of the 17th Communist Party Conference that a capital injection will also not be ready until the bank's restructuring plan is launched.China has named the reform of the policy banks as one of its top priorities in this year's central financial working conference.Exim Bank will transform from a government export credit institution to a bank promoting international economic operation, according to the conference. The need for a capital injection has arisen as the bank needs funds to boost its capital base.Li said separately that the bank has no plan to sell foreign-currency bonds as China has enough foreign reserves, accordin...
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China prepares for new economic leaders
2007-10-19 06:05:00
From ihtBEIJING: Sharply dressed in a pinstriped suit and purple tie, the chairman of China 's second-biggest bank talked animatedly at a news conference about its ambitions to expand abroad.But Guo Shuqing turned abrupt when a journalist asked a question hanging over this week's Communist Party congress: Is he due to become China's next central bank chief?"Rumor. Unfounded," the China Construction Bank chairman said with a chuckle, and called on the next reporter.As they haggle over posts in the ruling party this week, Chinese leaders also are assembling a corps of officials to guide the economy for the next five years, judging them on both job skills and loyalty to the secretive communist system.Although Premier Wen Jiabao, whose chief task is managing the economy, is expected to keep his post, a slew of leading economic portfolios are up for grabs.At least two vice premierships, which have in the past overseen financial and industrial reforms, are open, and the central bank gov...
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Internet ban is clue to China’s new leaders
2007-10-19 06:04:00
From Times OnlineChinese people who want to know the identity of the man who will be their leader into the next decade should log on to the internet.But in a country where politics are opaque and the media is banned from reporting such state secrets as the lineup of the new Politburo Standing Committee, the clues to their identities lie in what is prohibited. In the past few days it has become impossible in China to include the names Xi Jinping or Li Keqiang in a blog.These two men are most likely to take over as the next Communist Party chief and Prime Minister of China. They are almost certain to be appointed to the standing committee at the end of this week’s five-yearly Communist Party congress.The composition of the standing committee is one of the most tightly guarded secrets in China, but rumours about the list have been rife. Sources with close links to China’s internet service providers say that they have, in the past few days, been required to alter their servers to re...
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CORRECTION - China not considering mainland, HK bourse cross-shareholdings
2007-10-19 06:01:00
From ForbesBEIJING (XFN-ASIA) - The China Securities Regulatory Commission (CSRC) said conditions are not yet in place for Hong Kong and mainland stock exchanges to take stakes in each other, clarifying reports issued yesterday.China's three main official securities newspapers reported today that the CSRC confirmed that its vice chairman Tu Guangshao spoke on the subject at a briefing at the 17th Communist Party Congress, but with Tu stating that such cross-shareholdings are not yet possible because of government ownership of the mainland bourses.The remarks as reported by the official papers were aimed at knocking down a report by the Standard, a Hong Kong newspaper, that quoted Tu as saying that studies were under way on a possible swap of shares for companies with dual lisings in Hong Kong and on the mainland.The official papers all reported that Tu did not refer to the stocks of dual-listed companies.The earlier report sparked a fall on mainland bourses because that could narro...
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Is China's market a bubble?
2007-10-10 19:15:00
From Seattle TimesChinese stocks have been unstoppable. The market gained even in August, when other world markets were roiling from the credit crunch.Now, many economists and analysts say China's market is looking like a bubble. When it might pop is open to debate.Mutual funds focused on China returned nearly 29 percent in the third quarter and have more than doubled in the past 12 months, according to LipperThat compares with a 0.9 percent rise in the quarter for U.S. equity funds, which have gained 17.1 percent in the past year.The MSCI China index trades at about a 30 percent premium to the MSCI Asia index, excluding Japan, based on expected future earnings, says Vincent Chan, head of China research for Credit Suisse."There is little doubt about the fact that the China market is expensive," says Chan, who rates China "underweight."Americans typically invest in the mainland through mutual funds due to restrictions on foreign-share ownership.Among China's challenges is inflation...
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Emerging market bubble 'coming soon'
2007-10-10 19:13:00
From Sydney Morning HeraldA bubble will develop in emerging market equities in the next two to four years, says a specialist funds manager still bullish on the sector.Valuations in the so-called BRIC economies - Brazil, Russia, India and China - are higher than last year but still offer significant growth potential, according to Globalis Investments chief executive David Dali.Globalis is a joint venture between Macquarie Bank Ltd and US-based OneWorld Investments that offers actively-managed hedged and unhedged BRIC equities funds.As well as the BRIC countries, emerging markets include nations in western Europe, South America, the Middle East and Africa and tiger economies of Asia."We believe there is probably going to be a fairly significant overshoot of valuations (in emerging markets) before we have a major sell off," Mr Dali said."All the stars are lining up for a huge bubble - but we're not even close to it yet, which is one of the reasons we like this story."Emerging market e...
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Asian bubble out of control thanks to US
2007-10-09 18:06:00
From New Zealand HeraldInventors in China didn't make money last week. The reason: stock markets were closed.That's how easy it has become to ride China's stock boom; if the market is open, you can make money. It has long been known that mainland shares are driven more by momentum than fundamentals - more Ponzi scheme than market. With each passing day, though, things are becoming frothier and more surreal.Macau can't be happy. The island's proliferating casino business had designs on tapping a 1.3 billion-person market of gambling enthusiasts. These days, the real action isn't at Macau's baccarat tables, but in Shanghai and Shenzhen.What's happening in China is a transformation event. Rarely before, if ever, have investors been able to make so much money so quickly with so little knowledge of what they are buying.[Read more]
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China's energy giant leaps 87pc in biggest float
2007-10-09 18:05:00
From TelegraphThe shares of coal producer Shenhua Energy has leapt 87pc on the first day of trading in China's biggest ever float, prompting fears that the Shanghai market may have succumbed to speculative frenzy.The price surge catapults Shenhua into the top tier of global mining groups, with a market worth of $173bn (£85bn) The $8.8bn partial listing is the largest in the world so far this year, surpassing last month's float of the China Construction Bank.Shenhua is China's top coal producer, with output of of around 150m tonnes a year. It is likely to launch a blitz of foreign acquisitions to secure coal supplies for China's industrial machine as the country tips into coal deficit for the first time in its modern history.China still produces 38pc of global supply but its voracious needs have pushed up coal imports by 52p this year to 35m tonnes. The country relies on coal for three quarters of its power, adding to problems of smog and industrial pollution.The world market fo...
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Beijing real estate floats like a bubble on a bubble
2007-10-09 18:03:00
From Sydney Morning HeraldLIKE many before it, the Beijing developer SOHO China made a strong impression on its first day of trading in Hong Kong, with the share price rising by 15 per cent.SOHO's debut, which values the company at $US6 billion ($6.7 billion), comes while stock prices in China are skyrocketing and some of the country's biggest cities are being transformed by a building boom.Despite China's efforts to curb real estate speculation, housing prices continue to rise, encouraging even more construction and a frenzy of public stock offerings by big real estate companies.While the US endures a mortgage crisis, investors in Chinese real estate are celebrating and pushing the value of housing and housing shares to new heights.[Read more]
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Real estate in China drives an IPO boom
2007-10-08 18:08:00
From ihtSHANGHAI: Shares of Soho China , a Beijing property developer, soared 15 percent Monday on their first day of trading in Hong Kong - the latest hot public stock offering that is creating a new class of Chinese real estate tycoons.The spectacular debut of Soho, which values the company at $6 billion, comes at a time when stock prices in China are skyrocketing and some of the country's biggest cities are being radically transformed by a massive building boom.Despite government efforts to curb real estate speculation in China, housing prices continue to rise, fueling even more construction, and also a frenzy of initial public stock offerings by big real estate companies.Indeed, over the past few years, the IPO boom has already made some individuals worth billions of dollars.While the United States is in the grips of a subprime mortgage crisis, investors in Chinese real estate are celebrating and pushing the value of housing and housing shares to spectacular heights.[Read more]
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China The New Bubble
2007-10-05 17:46:00
From The Daily ReckoningIn the late 90s was another new era one based on communications technology and centred on dot.com start-ups. But the bubble in tech stocks blew up anyway as they always do. Only two years ago, many thought residential real estate had entered a new era. One bubble bursts only to puff up another. Now, the bubble du jour is in China .Professor Irving Fisher set the pace on October 16, 1929. The Harvard man was the most renowned economist of his day. But people should have known he was an idiot.In WWI, he forecast that the war would be very bad for the US. The Europeans would withdraw their money from Wall Street, he predicted, because they would need it to finance the war. America would be cut off from trade with Europe, stocks would fall, and the economy would go into a slump. Of course, what happened was the exact opposite. Europeans bought huge quantities of goods from the US and paid for them with their gold. America enjoyed a great boom.And then, he was a ch...
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China fails to curb soaring property prices
2007-10-02 18:16:00
From CCTVThe National Development and Reform Commission admits that the country has failed to curb soaring prices in the real estate sector, saying it will introduce stricter measures. NDRC said the gap between housing supply and demand is big in light of the aims of the "90-70 regulation."The State Council released a document last year requiring 70 percent of all homes being built to have an area of less than 90 square meters.According to the commission, only 24 percent of homes built in the first eight months of this year met the size requirement. That's up from 21 percent last year, but far below the required 70 percent.The commission says investment in real estate development nationwide increased by 29 percent in the period, 5 percentage points higher than the previous year. While sales increased 30 percent, 21 percentage points higher than for the same period last year.The commission says market demand is strong, and the gap between supply and demand is relatively big.[Read more]
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China Property Law Takes Effect
2007-10-02 18:15:00
From All Headline NewsBeijing, China (AHN) - State and private properties are now on equal footing following the implementation Monday of the Prop erty Law in China. Passed on March following revisions and eight readings, the law is expected to further boost the nation's economic and social reforms.When the legislation was approved on March, Chinese President Hu Jintao told a study group of the Political Bureau of the Central Committee of the Communist Party of China it should serve the basic interest of the people and help create a socialist society.Providing equal protecting to private property is in line with the country's Constitution, teachings of the Communist Party of China and popular sentiment, said Wang Liming, a professor at the Renmin University of China. He helped craft the landmark law.Xinhua News quoted Xu Xianming, president of the China University of Political Science and Law, that, "The law will inspire people's enthusiasm to create wealth and is helpful for them...
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HK shares set life high as subprime worries ease
2007-10-02 18:13:00
From ReutersHONG KONG, Oct 2 (Reuters) - Hong Kong blue chips jumped 3.9 percent on Tuesday and China plays leapt 5.6 percent amid a broad-based rally, as investors cheered a record high on Wall Street on hopes that the fallout from the U.S. subprime lending sector had bottomed."It's the world thinking that subprime is over," said Dale Tsang, managing director at Imperial Dragon Asset Management."People are jumping in to buy and catch up on their performance."Trading volume was unprecedented, eclipsing Friday's record, as buying was frantic on expectations of greater fund inflows from the mainland, as more global Chinese stock funds were being launched under the country's Qualified Domestic Institutional Investor (QDII) scheme.The benchmark Hang Seng Index cleared the 28,000-mark for the first time to end up 1,057.28 points at 28,199.75. Its day high was 28,256.80, marking its eighth consecutive record.[Read more]
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Bank of France's Noyer says French banks' subprime exposure very smal
2007-10-02 18:10:00
From ForbesPARIS (Thomson Financial) - Bank of France Governor Christian Noyer said the exposure of French banks to the subprime crisis is 'extremely small'.He said the vulnerable parts of bank revenues make up a 'quite small' of their overall net banking income.Speaking to the parliamentary finance committee, Noyer said that while there had been a 'slight tightening' of credit conditions in France as markets began to fret over US mortgage defaults, 'credit conditions are still very favourable'[Read more]
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Subprime crisis affects banks worldwide
2007-10-02 18:08:00
From Reuters(Reuters) - UBS AG the world's largest wealth manager, unveiled $3.4 billion (1.68 billion pounds) in losses, swept out senior managers and slashed jobs in one of the biggest casualties yet worldwide from the credit crunch.Here is a list of some other banks affected by the turmoil:February 8, 2007 - HSBC - Europe's biggest bank HSBC Holdings blames soured U.S. subprime loans for its first-ever profit warning in February this year. On September 21, it announced the closure of its U.S. subprime unit, Decision One Mortgage, and records an impairment charge of about $880 million.April 2 - NEW CENTURY - U.S. subprime lender New Century Financial Corp. files for Chapter 11 bankruptcy protection in the biggest collapse of a mortgage lender in the U.S. housing downturn.July - IKB & SACHSENLB - Two banks in Germany, IKB and state bank SachsenLB suffer exposure by investing in the U.S. subprime mortgage market. While the German banking industry bails out IKB, SachsenLB almos...
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China's premier calls for opposing Taiwan independence in annual National D
2007-10-01 07:28:00
From ihtBEIJING: Chinese Premier Wen Jiabao called on Taiwan to resist moving toward formal independence from the mainland, speaking Sunday in an annual National Day address traditionally used to appeal for unity between the rivals.Wen said China stood ready work with Taiwanese for unification and stressed that Beijing wanted to accomplish that peacefully."We will continue to work with all the Taiwan compatriots to oppose and repulse separatist activities for 'Taiwan independence' and advance the great cause of China's peaceful reunification," Wen said in the speech, delivered with Communist Party leaders seated nearby, and addressed an audience of Chinese political elite and foreign diplomats in Beijing's Great Hall of the People.Wen's remarks contrast with Beijing's recent alarmist rhetoric against Taiwan.China and Taiwan split amid civil war 58 years ago. Though a chilly peace has characterized their rivalry in recent years, Taiwanese President Chen Shui-bian has pushed for...
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Credit crunch threatens global downturn
2007-10-01 07:24:00
From China WorkerThe collapse of the sub-prime mortgage business in the US, brought home by the collapse of two hedge funds managed by Bear Stearns investment bank, provoked panic on money markets. The effects have already spread much wider than the housing finance sector. As a result, there is a paralysis of inter-bank lending and a seizing up of big sections of the wholesale money market.This crisis is potentially much more serious than the Asian currency crisis of 1997 and its aftermath, the collapse of the Russian rouble and the bankruptcy of the hedge fund, Long Term Capital Management. At that time, the US and other advanced capitalist countries were in a relatively strong position and intervened to stabilise the world economy. The present liquidity crisis originates in the US, the product of a partial deflation of the housing bubble and other debt bubbles which developed after 2001. The global financial system is under threat.Massive intervention by the US Federal Reserve, th...
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Theater breaks new ground in Beijing
2007-10-01 07:21:00
From USA TOdayBEIJING — The Eggshell, the Tomb, or the Big Bubble. Those are just a few of the derogatory nicknames that Beijing residents have used for the National Grand Theater , a massive, silvery dome in the heart of China's capital.Despite an unusually loud outpouring of public skepticism, Chinese officials insist the building, which held its first, invitation-only shows last week, will amaze foreign visitors during the 2008 Olympic Games.The futuristic, titanium-plated, $350 million complex just off Tiananmen Square is yet another demonstration of China's growing economic might and desire to outdo the Western world in every respect, including culture.Deng Yijiang, the theater's director, visited Broadway and watched 42nd Street during research to produce a theater he claims will be "bigger and more advanced than any of the theaters I saw in the USA."[Read more]
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Asia appeals, but beware the bubble
2007-09-30 06:53:00
From GuardianThe London stock market may have bounced back sharply since the summer's lows, but the recovery is as nothing compared to that in emerging markets. In the last week alone, the Hong Kong market has leapt more than 10 per cent, while such tiny markets as Peru, Croatia and Vietnam have registered gains of more than 6 per cent. Overall, the MSCI emerging market index has more than doubled since the start of 2005, well ahead of the thirtysomething per cent rise in the FTSE 100.[Read more]
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Pressure on central bank to slow China's surging growth
2007-09-30 06:51:00
From Sydney Morning HeraldTHE People's Bank of China has raised its economic growth forecast and says inflation will probably accelerate.The economy may expand 11.6 per cent this year, according to the report published in the China Securities Journal, faster than the agency's previous estimate of a 10.8 per cent expansion. Inflation this year will be 5 per cent, up from 3.2 per cent forecast previously, and the trade surplus will widen to about $US250 billion ($285 billion) this year from $US177.5 billion in 2006.The forecasts put pressure on the central bank's governor, Zhou Xiaochuan, to raise lending and deposit rates for the sixth time this year to cap surging asset prices and cool the overheating economy. On Thursday the bank raised interest rates on some home mortgages and increased minimum down payments in an effort to cool property price gains."It's clear they know they're behind the curve, in a hole, at risk of people taking more of their money out of bank deposits and...
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China Will Continue To Moderately Tighten Monetary Policy
2007-09-29 20:24:00
From Wall Street JournalBEIJING -- China 's central bank on Friday said it will continue to moderately tighten monetary policy amid inflation pressures, even as it closely monitors the potential impact of U.S. subprime-mortgage problems on global financial markets and China itself.The comments, in a summary of the People's Bank of China's third-quarter monetary-policy-board meeting, highlight that Beijing is weighing the risk of a domestic economic slowdown because of problems in the U.S. financial sector against the imperative to prevent China's economy from overheating, including curbing consumer-price and asset-price inflation.At the moment, the PBOC's focus remains mainly on the domestic economy, and in the summary it said it "will continue to implement a monetary policy with a moderate tightening bias."The summary, posted on the PBOC's Web site, comes after the August consumer-price index surged 6.5% from a year earlier, the fastest gain in more than 10 years, and as price...
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There's No Inflation (If You Ignore Facts)
2007-09-29 20:22:00
From NewsweekOct. 8, 2007 issue - Imagine that a cardiologist told you that aside from the irregular heartbeat, the stratospheric cholesterol count and a little blockage in your aorta, your core heart functions are just fine.[Read more]
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Beijing's housing market bubbles
2007-09-29 20:21:00
From ihtBEIJING: Elena Lou's PDA rings again. It is another rich client with a home to unload. Three years ago the client plunked down $320,000 on a choice villa near Beijing's Capital Airport and spent $100,000 sprucing it up. Now someone is offering him $820,000 - except the deposit deadline just passed and the prospective buyer has yet to ante up. Her client's reaction?"He's raising his price. Now he wants 7.8 million yuan," more than $1 million, said Lou, head of the local boutique real estate agency Elite Realty. "Second-hand interest is that hot right now. Sellers are getting hundreds of thousands more than their original asking prices."Prices for high-end homes in China's capital have been bouncing to record new levels all year, even with dramatically fewer transactions, rental prices flat and many new units empty.Some showrooms have fallen dead quiet. But popular addresses that hit the market a few years ago at $1,200 a square meter, or $112 a square foot, are now comma...
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