Positive Lightning

The irrational fear of lightning (and thunder) is astraphobia and someone who studies lightning is referred to as a fulminologist. I had a bit of both yesterday as ‘a father and mother’ of a storm descended on rural Sweden. Such freak weather is a typical by-product of a hot summer and, although only 100 or so people are killed worldwide every year by lightning, literally millions of computers, telephones and TVs are fried annually. So unusually, Building Value (“we never sleep”) was off the grid on Thursday save for the Blackberry which is not an ideal medium for lengthy communication.

This has meant a delayed celebration of the best month for a year on the Shanghai stock market; and at the time of writing July was showing a 10% gain. The prospect of looser economic policies, no rate rises and additional spending on tourism helped, as did rampant income growth. Net profits of Chinese industrial companies in 24 regions jumped 72% to $237.5 billion in the first half of 2010 from a year earlier. Similarly, new bank lending in July may have cleared Yuan 500 billion, with some Yuan 3 trillion expected for the whole of H2.

What could spoil the party, though (and cause Sunday lunch indigestion), is China’s Purchasing Managers’ Index for July which is invited on 1 August. It could slip below 50 for the first time since February 2009. Elsewhere, the Oriental Morning Post says that Shanghai will announce tightening measures for the real estate market in the second half of the year; and it quoted Zhou Bo, head of Shanghai’s National Development and Reform Commission.

Still, the likes of UBS (“fears of a so-called hard landing are overblown”), Macquarie (“a lot of value”), Nomura (“half way to a bull market”) and JPM (+21%) are all positive; albeit HSBC is less so.

“Bring in the bottled lightning, a clean tumbler and a corkscrew” (as Charles Dickens once said).

Shanghai Composite:
Today: -0.40% at 2,637.50 at close
This week: +2.6%
In July: +10.0
YTD: -19.5%

Hang Seng:
Today: -0.30% at 21,029.81 at close
This week: +1.0%
In July: +4.5
YTD: -3.9%

Oil: $78.12
Gold: $1171.20
Euro/$: 1.3076

Headlines:

• PBOC sees less need to lift interest rates, says IMF; but it can’t agree on the Yuan (which is undervalued by anything from 5 to 27%)
• Money market rate declines to a 13 week low of 1.68%
• PBOC sells three month (1.5704%) and three year bills (2.65%) at unchanged yields
• Demand for 30 year debt up as cash shortage eases (yield down from 4.03 to 3.96%)
• Sovereign wealth fund or CICC is planning bond sale
• Environment accidents in China double as growth takes its toll
• Nation needs $118 billion to build high speed rail lines