Donor fatigue

DF is a phenomenon in which people no longer give to charities. There are a number of causes of it, including overstretched budgets and frustration with badly managed charities; plus simply being over-whelmed by the number and scale of global disasters. I can understand how it happens, but can anyone not be palpably moved by the scenes from both Pakistan and Gansu in China at this time?

The Indus River is the most important river in Pakistan, and, at 3,200 kilometres it is also the longest. It flows the full length of the Nation from Tibet to the Arabian Sea and is a vital life source. Right now this is hard to believe as it breaks its banks and floods at almost every twist and turn. At least 1,600 people are dead and up to 20 million (from a total of 180 million) are displaced. Cholera has broken out.

In Gansu and the town of Zhouqu, in particular, the scenes defy belief. The centre is simply filled with glutinous mud and debris up to the third storey; and lower rise buildings have simply been swept away. It is impossible to imagine, the terror in the darkness when this tsunami of water, mud, rocks and trees swept through Main Street with no warning. Members of single families survived sleeping upstairs whilst their relatives downstairs disappeared, some never to be found. The latest count is 1,200 dead with more than 500 missing.

Such events put investor fatigue and whether the Karachi 100 or the Shanghai Composite goes up or down into perspective. But we go on; we go on because we must.

Turning to today’s headlines, China now looks like a shoe-in to be the World’s number two economy this year after Japan’s GDP rose marginally (by an annualised 0.4%) in the three months ended 30 June. Nonetheless, Japan is still favoured by China’s sovereign wealth fund along with Europe – and at the expense of the US. The Nation has been buying “quite a lot” of European bonds, according to Yu Yongding, a former adviser to the PBOC. Similarly, China bought $20.1 billion more Japanese debt than it sold in the first half of 2010, the fastest pace of purchases in at least five years. China’s $2.45 trillion of foreign exchange reserves are the World’s largest.

However, “stocks won’t have a big jump simply because China will surpass Japan in terms of the GDP” said China Construction Bank. “What we are looking at is the quality of the GDP such as per capita disposable income and energy consumption per unit of GDP. Stocks will react positively only when China has successfully transformed the structure of its economy”. Other commentators focus on rising inflation and, thus, favour gold stocks; or as Nomura says higher food inflation make equities a “more appealing asset class” relative to fixed income. “The recent rise in inflation supports the case for local equities to experience fund flows from deposits”. Morgan Stanley also likes property shares (down by an average 12% this year) in China and expects a rebound in prices, despite Chongqing’s probable introduction of a property tax.

Elsewhere, power consumption grew 14% in July which sharpens focus on the Nation’s forthcoming $736 billion of alternative energy investment. And, finally, the Yuan continues its longest losing streak for a year and AgriBank becomes officially the World’s largest IPO at $22.1 billion.

“There are two big forces at work, external and internal. We have very little control over external forces such as tornadoes, earthquakes, floods, disasters, illness and pain. What really matters is the internal force. How do I respond to those disasters? Over that I have complete control”. Leo F. Buscaglia

Shanghai Composite:
Today: +2.11% at 2,661.71 at close
Last week: -1.9%
YTD: -18.8%

Hang Seng:
Today: +0.19% at 21112.12 at close
Last week: -2.8%
YTD: -3.5%

Oil:
$75.28
Gold:
$1220.20
Euro/$:
1.2805

Headlines

• Morgan Stanley favours property shares in China and now expects a rebound
• Chongqing to introduce property tax on a trial basis
• China may make list of developers hoarding homes
• Urbanisation is expected to lead to the demolition of half the old houses in China
• Economic planner sees new factors pushing up prices in China in third quarter
• Power consumption rises 14% in July as targets for reductions loom large
• China may introduce alternative energy plan next month
• Yuan has longest losing streak in a year on slowing growth
• Finance Ministry sells $4.1 billion of 30 year China bonds at a yield of 3.96%
• China should raise deposit rates, says PBOC Adviser
• ICBC Credit Suisse seeks to raise $2.1 billion for largest China bond fund
• Agricultural Bank of China sets IPO record as size raised to $22.1 billion
• West China Cement raises $179 million in Hong Kong
• China mourns mudslide deaths