Skip to main content

Decoding China's Pulse

Important Chinese bigwigs at a just concluded economic conference identified five major problems in the national economy in a bid to better steer the country's economic growth in the coming year. The three-day Central Economic Work Conference that ended on Wednesday cited overheating risks, inflation pressure, a weak agriculture sector, arduous energy conservation and emission reduction tasks and prominent issues on welfare of the general public as key concerns of Chinese authorities.
It emphasized that it would be of great significance to properly guide the national economy in 2008, which is the first year for China to implement policies mapped out at the 17th National Congress of the Communist Party of China (CPC), during which the country's new leadership was selected.
China will host the Olympic Games in August next year, for which the government is going all out in preparation to guarantee the success of the major event.The meeting has also outlined policies to be adopted to ensure problems could be properly solved, such as the prevention of overheating economy and guarding against a shift from structural price rises to evident inflation.
Overheating Risks - A liquidity issue which channels itself into property and stock markets. To rein in these risks is very difficult. Beijing have been raising bank's reserve requirements and stopped banks from lending till end 2008.

Inflationary Pressures - Another liquidity issue. Can be combated by subsidy from the government or price controls.

Weak Agriculture Sector - A planning problem.

Energy Conservation & Emission Risks - Putting in measures which would eventually lead to more rules and regulations, thus increasing the cost of doing business - but a desired development.

General Public Welfare - General workers salaries not catching up fast enough with prices, and the still troublesome unemployment in more remote areas of China. Another planning issue.

We have to remind ourselves that although most of us know China intimately through their stock markets, the authorities have larger fishes to fry. Just because we view their stock marets with "importance", listed equity is still a small proportion of the real economy. If there is no overheating risks, they would certainly do nothing to stop Chinese equity markets from rising further.

Their property markets have been subdued somewhat, as these larger committments are easier to control via fiscal measures. Stock markets are more difficult to rein in as funds can move in and out.

Looking at the above factors, chances are this is only a temporary pause for the bull run because liquidity is still intact. As companies keep churning out decent results, it is likely to reignite the market's run. Raising the reserve requirement stems the banking side, but liquidity is already there. Raising bank lending rates also will hurt property side more but not stocks because the gap between deposit rates and BLR is still too wide, about 4 percentage points. Unless that gap is about 2 percentage points, only then will hikes in BLR attract real funds into deposits and away from stocks. Hence the hike in interest rate over the weekend is rather a non-event, in fact it could prompt some to re-enter the equity markets because another hike may be a few months away.

Beijing still have many fiscal measures it could implement if things really get out of hand - such as raising transaction fees or even taxing capital gains. These measures are not likely to be implemented till maybe the all time highs have been breached again. Hence on balance, the bull run should continue soon and things should be "safe" at least till it nears their all time highs. China dolls, come to papa ...
GOOD TRADING BUYS
( but watch those expiring in 2-3 months time, and get out when time to expiry is near)

CCCC-C3 0.23
CCCC-C4 0.16
China Life-C3 0.17
China Life-C4 0.48
China Merchant-C1 0.12
CNOOC-C1 0.36
Chalco-C1 0.14
China Construction Bank-C1 0.12
Shenhua-C1 0.37

STRONG BUYS

China Mobile-C5 0.51
China Coal-C1 0.13
ICBC-C4 0.23
Petrochina-C4 0.43
Sinopec-C2 0.17
Sinopec-C3 0.15

Comments

wqlq said…
sifu dali, china cw getting hit badly *sigh* any hope of seeing bottom yet?

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.


My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.


Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:






























p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far



http://malaysiafinance.blogspot.my/2016/12/bank-negara-may-have-switched-on-bull.html


I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…