"That was the week that was"

Older, Commonwealth readers will remember that the above “TWTWTW” was a famously satirical and ground-breaking BBC TV programme; others, will simply applaud the five day performance of the Shanghai stock market which was up 6.1% in the best week of 2010 (so far). The prime driver is the belief that, as the economy slows, the Chinese Government will not now implement economic and real estate tightening measures (albeit there is no firm evidence this will be so). That said, Citigroup supplied grist to the mill in the form of cutting its China GDP forecast by the most since 2001 (down 1% to 9.5% for 2010). In the ‘more worrying camp’, though, was a slowing rate of auto sales. Why is it a worry? Because domestic consumption is supposed to be the touchstone of more nimble economic growth.

Specifically, on real estate there was also a push:pull of good and not-so-good news. In the former, is the fact that the yield premium (to Government debt) of local currency developers' bonds has narrowed to the lowest ever (95 basis points). That said, offshore dollar bonds have moved the other way and a national property tax now seems inevitable by, say, 2012. But is this really something to be concerned about? I, for one, think the market can take it, especially if it is 0.8% of market value for those with multiple homes (as theorised by ANZ).

Finally, spare a thought for those suffering in the dreadful floods in Southern China at this time.

On Monday, I pinched Harold Wilson’s quip about a week being a long time….but if they are as similarly protracted as this one. Bring it on!

Shanghai Composite:
Today: +0.38% at 2,572.03 at close
This week: +6.1%
YTD: -21.5%

Hang Seng:
Today: +1.10% at 20,815.33 at close
This week: +2.8%
YTD: - 4.8%

Oil:
$78.88
Gold:
$1198.20
Euro/$
1.2931

Headlines

• Best week of 2010 (so far)
• Chinese investors defy warnings as Yuan property bonds rise
• China plans to start implementing property tax trial in 2012
• Shui On Land may sell properties outside of Shanghai
• Citigroup says global outlook is worsening and cuts China target by most since 2001
• Rebound may falter as Government delays easing, says Deutsche Bank
• PBOC may publish a rate with which to manage Yuan versus a basket of currencies
• Yuan demand in Hong Kong may lead to twin rates, says Standard Chartered
• Hong Kong inflation quickens to fastest pace in 19 months on rents and food
• Chinese banks need to raise more capital to meet lending growth, says S&P
• Finance Ministry sells 182 day Bills at a yield of 1.798%
• PBOC sells three month bills at unchanged 1.5704% yield
• Hong Kong property purchasers spend less in China
• China's vehicle prices may fall on increasing inventories
• Tropical storm Chanthu kills two and destroys 3,000 homes in Southern China