Zarathustra

5

China copper inventories at record levels

Courtesy of Also Sprach Analyst: Last week’s China trade data pointed to weak domestic demand and even weaker external demand.  Now everyone knows that. Yet imports of unwrought copper was still up in July, as Nomura pointed out last weak.  On a month-on-month basis, unwrought copper imports have risen by 5.9%, and was up 19.5%

1

PBoC may buy bonds to inject liquidity

Courtesy of Also Sprach Analyst: The People’s Bank of China (PBOC) may purchase government bonds in the future, according to a Yicai report yesterday. The potential move to purchase government bonds in the secondary market, according to the report, will be used to inject liquidity into the banking system.  The new move will be used

0

A Beijing-based credit guarantee company is going bust

Courtesy of Also Sprach Analyst: Back in May, Patrick Chovanec of Tsinghua University of Beijing highlighted the risks of credit guarantee companies.  Similar to the mutual and collective guarantees we mentioned recently (e.g. that 600 companies that were dragged down, or some steel companies that were dragged down), some companies could only obtain bank loans

4

Why China is hesitant to stimulate

Courtesy of Also Sprach Analyst. Despite widespread calls for  it to do so, the People’s Bank of China (PBOC) has not yet cut the reserve ratio requirement (RRR) for banks, let alone interest rates more generally. This is mainly because, in my view, the real estate market has been warming up much quicker than the government would

1

China’s July lending adds to the gloom

Late last week, the People’s Bank of China published the latest monetary statistics for July 2012, which are dismal. M2 money supply increased by 13.9% compared with a year ago, up from 13.64% yoy, slightly higher than estimate of 13.8% yoy.  M1 money supply increased by 4.6% compared with a year ago, almost unchanged from June, but

5

Europe monsters China’s exports

Courtesy of Also Sprach Analyst. Breaking down China’s trade numbers by region, exports growth to Europe has fallen off the cliff: This is a very weak set of numbers.  Exports growth was dragged down primarily by Europe, reflecting the fact that Europe is more or less in a deep recession already, although this was still somewhat worse than

2

Chinese capacity utilisation plummets

For a long time, we have suggested that because of China’s GDP growth being driven primarily by investment, the end result will inevitably be over-capacity.  This has been apparent in industries such a ssteel, machinery and others (now even Caterpillar is exporting overcapacity in China, so to speak).  We also believe that the construction boom after the

14

Rio pins its hopes on unconfirmed Chinese stimulus

There are some hopes that Chinese stimulus will work wonders.  Rio Tinto, for instance, believes that the stimulus will support demand for their iron ore.  Chief executive Tom Albanese said in today’searnings announcement: Although sentiment remains negative in Europe and the US recovery is still fragile, our order books are full and we expect Chinese GDP growth

2

China’s leading indicator slides on

Courtesy of Also Sprach Analyst: We will soon get a glimpse of how the Chinese economy was doing in July and to see if it has indeed reached a bottom as most are hoping for. There are, of course, reasons to be both optimistic and pessimistic about the bottoming.  As the Chinese government has elevated growth to

5

Are Chinese profit warnings signalling a bottom?

Recently, Hong Kong-listed companies (many of which are Chinese companies) have issued profit warnings at a record pace.  There is little doubt that many of these companies are facing an environment which, to them, is probably not much different from a hard landing. Although I am not at all optimistic about China’s economy over the medium term (as

2

China’s July lending and retail appear weak

Courtesy of Also Sprach Analyst. China’s big 4 banks have extended RMB220 billion of net new loans in July, up from about RMB190 billion in June, according to China Securities Journal. Despite new lending at big 4 banks increased by 100% for the first half of July compared with the first half of June, total lending for the

3

Of corn and Chinese pork

The recent surge in global food prices triggered by the drought in US has raised fears of another round of food inflation, particularly in the emerging markets. As for China, Barclays is relatively optimistic, suggesting that China is better at coping with that than in the past. Société Générale, however, brought up the following chart last week.  This is

3

Chinese manufacturing sheds labour

Nobody ever pays attention to the unemployment rate figures published by Chinese officials as they hardly ever change, regardless of the economic situation. However, the current economic slowdown has probably increased unemployment.  For instance, we have anecdotes of migrant workers in coastal cities returning home as factories close down and construction activity slows. The chart below shows

2

Chinese rail cargo still sinking

China’s vice premier Li Keqiang was widely reported to have said that China’s GDP figures are not reliable.  According to Reuters, he is said to rely on electricity consumption, rail cargo volume, and banking lending. In case you have not been watching, the rail cargo volume growth on a year-on-year basis has just turned negative in June. 

12

More Chinese regions propose mega-stimulus

While China’s central government is reluctant to start a stimulus programme comparable to the previous RMB4 trillion one, and despite the fact that the previous massive stimulus is widely regarded as a mistake, local governments are considering stimulus like last time. Since Premier Wen put growth back to the top priority, while stopping short of massive

0

Will China’s regions repeat the big bang stimulus?

Last week, Changsha, the capital city of Hunan, announced that they have held some sort of roadshow for banks on 25 July to promote RMB829.2 billion worth of investment projects.  This followed yet another roadshow by the city of Changsha for state-owned enterprises held in Beijing last week.  Some took that as a massive stimulus programme. It is

1

Macau gambling indicator falls again

I watch Macau’s casino revenue as an indirect indicator of China’s economic activities. The revenue growth has been pointing the slower growth in China. Fitch has just revised the casino revenue forecast for 2012 from 15% to 10-12% for the full year on the impact of China’s slowdown on casino revenue. This is the second downward revision of the revenue forecast. 

0

Steelmaker’s default shows Chinese overcapacity

Courtesy of Also Sprach Analyst. Chongqing Iron and Steel Company is said to have defaulted on some of its debt in the past year, totalling to some RMB3.6 billion, once again highlighting the difficulties steelmakers are facing amid slowing demand and over-capacity. The company is said to have defaulted on loans and financing leases from

6

More bolters emerge in China

Courtesy of Also Sprach Analyst. A worrying new wave of business owners running away is emerging in China, as their overstretched and over-leveraged companies run into financial troubles. Last year, I noted a wave of companies’ business owners running away as the economy slows. Many of these companies were forced to borrow from the informal lending system

3

China coal inventory surpasses GFC peak

I have mentioned a couple of times that coal inventory in China has reached historical high both in ports and at power plants as demand for electricity (and hence coal) slows amid slowing economic growth, while production of hydroelectric power picked up recently. The chart below is from Goldman Sachs, which shows the coal inventory days at major

6

China’s off-balance sheet lending explosion

Last week’s People’s Bank of China Financial Stability report contained a few statistics that look unbelievable.  I noted few months ago that the size of banking assets for Chinese banks has reached RMB113.3 trillion, which was 239.7% of 2011 nominal GDP.  That is a staggeringly large number compared to the West, but as credit markets are less developed in China,

1

China’s June lending bounces

Courtesy of Also Sprach Analyst. The People’s Bank of China recently published the latest monetary statistics for June 2012. M2 money supply increased by 13.64% yoy in June, higher than the expected 13.5% yoy growth.  M1 money supply increased by 4.68% yoy, higher than the expected 4.0% yoy growth. Currency in circulation increased by 10.81%, again higher

4

Baosteel pulls a project

In May, the government approved a new steel project by Baosteel, planning to build a new facility in Zhanjiang of Guangdong while the provincial government promised to close down excess capacity elsewhere in the province.  The project was started very quickly after approval. However, the latest news suggests that although the project was started, and there was some

2

More shadows surface for Chinese banks

Chinese banks shares were hit yesterday on the stock market, led by China Construction Bank (CCB), which fell by 2.95% in Hong Kong on the news that it is the biggest lender to Zhejiang Zhongjiang, which is going bust. Interestingly, three months ago I briefly mentioned Zhongjiang when one of its subsidiaries, Jinxing Property, filed for bankruptcy. This is another

8

China’s shadow banking surfaces

Courtesy of Also Sprach Anlayst. Wenzhou of Zhejiang province is one of the most, if not the most, entrepreneurial places in China.  It also happens to be the place where the shadow banking mess in China is concentrated.  Loan sharks, trusts, and mutual credit guarantees are some of the elements of the informal lending system in China which are all common

4

China’s heavy industry unearths trouble

Signs of slowdown in the Chinese economy are obvious, and it is being felt by more and more industries. Last week, there was a rumour that Sany Group plans to lay off some 30% of its workforce (although the rumour was subsequently denied), highlighting the impact of slowing growth and, in particular, slowing fixed-asset investment, on sales of heavy equipment Facing

0

China slashes interest rates

Courtesy of Also Sprach Analyst The People’s Bank of China, just like last time, has announced interest rates cuts at the precise moment when the Bank of England announced its rate  decision. The 1-year deposit rates are cut by 25 basis points with rates at all maturities being cut by a varying degree.  Most notably, fixed deposit

0

Chinese bank lending weak in June

Courtesy of Also Sprach Analyst. Last month, I noted that demand for credit at big 4 Chinese banks remained weak while deposits fell.  That has been the recurring theme for the Chinese banking system in recent months as the economy slowed and entered into a debt deflationary environment.  I did stress, however, that Chinese banks are policy driven, thus lending can

6

Death of the China cult

Courtesy of Also Sprach Analyst. People in Hong Kong have a long history of mistrust of China. This city, after all, was a colony of the British Empire for more than a century, and has only been under Chinese rule (under one country two system, to be precise) for a mere 15 years. In this city, you seldom