Posts tagged ‘CLSA’

  |  
17/09/2014

Could India Edge Out China? – Businessweek

China’s President Xi Jinping is due to arrive in India tomorrow, and for a change he’s the one with an economy heading in the wrong direction, not Indian Prime Minister Narendra Modi. After several dismal years, growth in India is rebounding, and the stock prices of companies selling to Indian consumers are benefiting from the surge in optimism that accompanied Modi’s landslide election victory in May. Britannia Industries (BRIT:IN), the Kolkata-based maker of cookies and other food products, is up 55 percent so far this year and today hit a 52-week high. “The Indian consumption story is back,” Credit Suisse analysts Neelkanth Mishra and Ravi Shankar wrote in a report published today.

Electronic ticker boards at the National Stock Exchange in Mumbai, India

Meanwhile, China is struggling as the troubled banking system and property markets put a damper on the economy. Hit by a slump in the property market, the Chinese economy expanded at an annual rate of 6.3 percent in August, a dramatic slowdown from the 7.4 percent growth in July and nowhere close to the government’s target of 7.5 percent. So far this year, the area of new property under development has declined 14.4 percent. The data from last month “made depressing reading,” Bloomberg economist Tom Orlik wrote in a report published yesterday.

The role reversal could lead to a world-turned-upside-down moment as early as 2016. That’s when India, always the laggard, may pull ahead of China and became the fastest-growing of Asia’s giants. India is likely to enjoy 7.2 percent growth in 2016, says Rajeev Malik, senior economist in Singapore with CLSA, compared with China’s 7.1 percent. Given the structural problems Xi faces and the slack Modi inherited, “China has to slow down, and India can do much better,” he says.

India has suffered from a chronically high inflation rate, but there are signs that pressure is easing, albeit slowly. Consumer prices last month rose 7.8 percent, a slight improvement from July’s 7.96 percent. Yesterday, the government reported wholesale prices rose 3.74 percent in August. That’s the best result in five years.

via Could India Edge Out China? – Businessweek.

Posted in China alert, Chindia Alert, Economics, GDP, growth, India alert | Leave a Comment »

Tags: , , , , , , ,
14/08/2014

Chinese Buyers Are Driving a Boom in Australian Real Estate – China Real Time Report – WSJ

Australian house prices are rising quickly and demand from China is increasingly driving the boom, according to a report by Hong Kong-based brokerage CLSA.

The report, based on interviews with 50 industry participants in Australia, including major realtors, finds Chinese are now “driving the residential property market Down Under” adding that the “phenomenal investment” will continue for at least three more years.

CLSA says China is now the top source of foreign-capital investment in Australian real estate and anecdotal evidence indicates that foreign investment from China has continued to increase in 2014, having slowly accelerated over the last 5 years. The stock brokerage did not attempt to put a value on the investment.

CLSA said good education and a clean environment were driving demand from China.

“Australia offers both and we see no reason why its fundamental appeal will diminish,” it added.

There are currently only limited curbs on foreign buying of Australian property. Any newly built Australian property can be bought by foreigners . The purchase of existing properties needs the approval of Australia’s Foreign Investment Review Board.

Government data this week showed house prices nationally grew by 10% in the year-to-June 30, with Sydney prices racing at 15% over the same period.

The issue of Chinese investment in Australian housing investment has prompted concern among Australians about the potential to be frozen out of the housing market, especially the highly desirable inner city markets of Sydney and Melbourne.

A government investigation into the issue of foreign investment in Australian property is underway and will report its recommendations in October.  One of the limitations of the debate over the issue is that there is not reliable data on how much money is coming into property from overseas.

Australia’s central bank has been watching the rise in house prices but has so far downplayed the role Chinese money has had on prices growth. If house prices continue to climb, the reserve Bank of Australia might have to raise interest rates at a time when the economy is weak and unemployment at more than decade highs.

via Chinese Buyers Are Driving a Boom in Australian Real Estate – China Real Time Report – WSJ.

Related articles

Posted in Affluence, China alert, Economics, real estate | Leave a Comment »

Tags: , , , , , , , ,
31/01/2014

Feng Shui Masters at Odds Over Prospects for Year of the Horse – China Real Time Report – WSJ

The Year of the Horse, which begins Friday, is a dangerous one for investing, according to Master Koon, a Hong Kong-based feng shui master.

The Chinese zodiac runs on a 60-year cycle, as the 12 animals occur in combination with each of the five elements of traditional Chinese cosmology: wood, water, fire, metal, and earth. The “wood horse,” which is up this year, represents “instability and disruption,” Master Koon said. A previous wood horse year, 1894, saw war break out between China and Japan – hardly an auspicious sign.

“Property, the stock market, the economy, politics—they’re all unstable,” said Master Koon. “So investments need to be conservative.”

Master Koon’s analysis flatly contradicts that of brokerage CLSA, which argued in a recent report that the Year of the Horse would be a good one for stocks. Based on its own survey of five feng shui diviners, CLSA calculates the Hong Kong stock market’s benchmark Hang Seng index will likely rise 28% over the next year.

It seems the masters of feng shui are no more in agreement than professional economists, whose prognostications for China’s growth vary from an export-driven resurgence to financial meltdown. It isn’t clear which profession has a better record of forecasting.

via Feng Shui Masters at Odds Over Prospects for Year of the Horse – China Real Time Report – WSJ.

Enhanced by Zemanta

Posted in China alert, Chinese Zodiac, Economics, Social & cultural | Leave a Comment »

Tags: , , , , , , , , ,
14/05/2013

* An addiction that could spell economic disaster

The Times: “Fund managers who between them control more than $1 trillion in assets were warned yesterday that China was in the grip of a debt addiction that could destabilise its financial system.

Traditional houses in the shadow of new high-rise apartment blocks in Shanghai

Speaking at the annual CLSA China Forum in Beijing, Francis Cheung, the brokerage’s China head, said that the country was hooked on an “unsustainable” pace of growth requiring ever-greater injections of debt to keep going.

Fifty per cent of the Chinese econ-omy is made up of investment, an unprecedented level for a country at its stage of development, sucking in increasing amounts of credit, effectively to buy growth.

Total debt in the world’s second-largest economy soared from 148 per cent of gross domestic product in 2008 to 205 per cent of GDP last year and is expected to hit 245 per cent by 2015, Mr Cheung said in a report.

But despite the rising tide of investment being poured in to build everything from houses and roads to railways and power plants, China’s credit habit is becoming less effective, with the same amount of debt generating lower returns every year.

China’s annual GDP growth has almost halved from 13 per cent in 2007 to an expected 7.5 per cent this year, while total debt has more than doubled in the same time, a development model that President Xi Jinping also has called “unsustainable”.

“China is running just to stand still … China is not a rich country; it is a lot of debt for a country at this GDP level. What I worry about is unregulated lending,” Mr Cheung told the forum.

With Chinese industry suffering from overcapacity in every sector from steel to cement to solar panels, the country “cannot use any more stimulus policies to boost growth”.

The fastest-growing debt is that shouldered by local governments, with the undisclosed sum estimated to have hit 20 trillion yuan (£2 trillion) last year — a doubling in two years. Local governments are being forced to pay more to service their debts, while their ability to raise money through selling land is slowing.

The biggest risk, Mr Cheung said, came from the growing use of unregulated loans generated by “trust companies”, financial sector intermediaries that make money from offering risky loans known as “wealth management products” to private companies unable to get credit from state-run banks.

A report published by Moody’s yesterday found that China’s “shadow banking” sector had hit an estimated 29 trillion yuan (£3 trillion) last year, posing a “systemic risk” to the financial system, despite a partial clampdown in March. The credit ratings agency also warned of the threat of contagion, stemming from little-regulated shadow lending that has swollen by 67 per cent in the past two years.

Last month China sudffered its first sovereign credit rating downgrade in 14 years as Fitch lowered its appraisal amid fears that its debt problems would necessitate a government bailout.”

via An addiction that could spell economic disaster | The Times.

Related articles

Posted in Banking, China alert, Economics | Leave a Comment »

Tags: , , , , , , , , , ,
14/05/2013

* Right thing to do comes with a price tag

Now we know why the Chinese government has been hesitant about correcting the rights of its vast migrant worker population. If the public expenditure required to turn a rural migrant worker into an urban citizen is estimated to be around 80,000 yuan ($12,664) in China, then the total for the estimated 230m migrant workers to be fully urbanised will cost some 3 trillion US dollars. A cost even China will find too large to handle in one go.

The Times: “100,000 … yuan is the estimated cost of turning a rural resident into a fully registered urbanite and providing them with all the healthcare, education and social security rights denied to China’s vast migrant worker population when they move to the cities.

Workers weld a standing on the roof of a building at the Guanyinqiao Pedestrian Street in Chongqing Municipality, China

Dangerously belated reform of China’s household registration — hukou — system may or may not be unveiled by Beijing this year. Clearly there is the political will, but officials mutter that the reform package is snagged on the details.

If that £10,600 estimate proves even close to reality (it’s a government estimate, so don’t expect too much from it) and if the reforms were tested initially on a limited basis to affect only 10 per cent of China’s overall migrant worker population, that would still cost about two trillion yuan (£211 billion). If the Government shouldered only a third of that (splitting the financial burden three ways with companies and employees), China would be paying more on this first blush of hukou reform than it is spending on its entire military budget.

But, according to the CLSA economist Andy Rothman, it would be money well spent. Grant migrant workers an urban household registration and all sorts of good things would happen. They would become consumers, they would become a more highly skilled and better-educated slab of workforce. They would be a less consistent source of social unrest.

For Beijing, it is painfully clear that foot-dragging on hukou reform is really not an option any more. If the Government flinches at the cost, the very considerable social implications or the politics of reform, China’s great urbanisation story could lurch from nice to nasty in short order. Miss the chance to reform and, at best, the whole programme of switching China’s growth model towards consumption stalls because tens of millions of migrant workers are forced to remain precautionary savers. They would remain unwilling to think of more than a small percentage of their income as disposable because, without an urban hukou, they are condemned to live without the protection of a welfare system.

At worst, the migrants create a permanent underclass in each of the 150 Chinese cities with populations of more one million. As the administration in Beijing knows well, this is not an underclass that could be relied on to behave itself: without reform, it will only grow angrier.

The problem, as usual, is one of scale. China’s 234 million migrant workers are unambiguously the backbone of the economy. Somebody has had to constitute an unlimited supply of labour and be prepared to work at a subsistence wage for the Chinese “miracle” to work at all. The migrants are those people. Migrant workers keep China’s factories humming, they cook, they clean, they funnel money from the cities to the countryside and, most symbolically, they built the place as 90 per cent of the construction industry workforce.

And the problem is that they all have mobile phones and internet access. Much though China would like to test out a bit of hukou reform on a smallish initial batch of 20 million people (equivalent to the population of Romania), as soon as that process began the other 210 million migrant workers (equivalent to the population of Indonesia) would start asking why some were receiving the blessing of urban residency and not others.

It’s an all-or-nothing game, unfortunately for Beijing, and that calculation of 100,000 yuan per person suddenly implies a £1 trillion burden for the State.”

via China in numbers: right thing to do comes with a price tag | The Times.

Related articles

Posted in China alert, Economics, employment, Labour, Migrant workers, temporary workers | 3 Comments »

Tags: , , , , , , ,
  |  
CCChang

Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India