The Beautiful Game

The beautiful game came alive in Soweto on Friday as the 19th FIFA World Cup began with 32 countries represented. Notable non-qualifiers this time, however, are Belgium, Columbia, Hungary, Peru, Russia, Sweden, Turkey and, of course, the PRC – despite them beating Myanmar 7-0 in one of the qualifying rounds. It is my sense, though, that it is only a matter of time until China will be vying for the glory that has been Brazil’s five times, Italy’s four and Germany’s three (okay, and England one). By way of a pointer, is the Nation’s success at its home Olympics in 2008 (2nd in the table with 51 Gold Medals) and - less usual - at the Winter version, in Canada, earlier this year (8th with 5 Golds, including the figure skating pairs).

A small glass of Chauvinism-lite aside, too, I reckon China can do most things it sets its mind to; and it is already, for example, the second largest global economy-elect, the fastest growing major, a benevolent neo-colonialist, friend to many of the World’ bad boys and part-time mercantilist.

In a game of two halves, the first six months of 2010 has been a bumpy one with simultaneous fears of overheating/economic slowdown, pre-eminent bubbles (especially in real estate) and a bear stock market. Last week’s economic data, though, provided more comfort blankets for the bulls than the bears. Sure, inflation was at a 19 month high of 3.1% annualised in May - but did anybody look at the month on month movement? It showed a 0.1% fall from April. Similarly, while producer price inflation on an annual basis was +7% in May - and also the largest for 20 months - it moved just 0.6% from April. Elsewhere FDI or Foreign Direct Investment in China rose for a 10th month in May – up 27.5% to $8.13 billion and is maybe set to reach $100 billion this year thereby beating 2008’s record.

Wage levels have also been grabbing headlines and, once again, this has created a push/pull on negative and positive comment. Similarly, while Honda and Hon Hai Foxconn have been the most high profile, “there are strikes every day in China that never get reported”, according to the China Labour Bulletin and reported in The Sunday Times. It is not my intention to debate the moral efficacy of wages here. But, on an economic level, the S.Times says “wages could double and it could be absorbed”. Similarly, Morgan Stanley added that a doubling of China’s manufacturing wages over the next five years will not damp foreign investment because Asian rivals such as India and Indonesia lack comparable infrastructure”.

Despite a yellow card before half-time, China is becoming more and more sure-footed, particularly with its team’s (economic) management - from which other national competitors could learn. UBS and Deutsche are also new supporters this morning. Time is on China’s side and a hat-trick beckons.

Shanghai Composite:
Friday: +0.29% at 2,569.94
Today: Closed
Last week: +0.6%
YTD: -21.6%

Hang Seng:
Today: +0.88% at 20,047.14 at 12.35
Last week: +0.5%
YTD: -8.3%

Oil:
$74.54
Gold:
$1231.40 (record was $1252.11 on 8 June)
Euro/$
1.2174

HEADLINES

• FDI rise for 10th month in May
• Inflation rises to 19 month high of 3.1%
• CPI may decline in June from previous month, says NDRC
• Economic data challenge Government’s on tentative recovery and Yuan
• WTO rules do not support probes aimed at the Yuan
• Demand falls short for treasury bills
• China investigating leak of data which moved financial markets
• China Vanke says share sale plan will be “relatively difficult”
• China orders local Governments to ensure repayment of debts
• UBS advises investors to return to China stocks on valuations
• Deutsche Bank says emerging market valuations point to returns up to 42%
• China to spend $4.7 billion on post-earthquake reconstruction in Qinghai
• China and Taiwan reach basic agreement on tariff reductions
• Chinese company to build $12.5 million cement plant in Tanzania
• Road accidents killed almost 4,700 people last month

ENDS