A little bit....

Having a modicum of inflation is like being a little bit pregnant i.e. the situation is a binary: it is something that “is” or “isn’t”. The duration of China’s latest fecundity is the cause of some speculation, although the very clever Jun Ma at Deutsche blames food prices in August and says that the CPI may rise above 4% this month. The externality of this, too, is that we can probably kiss goodbye to monetary easing; plus there are rumours of further bank stress tests. Nor is there any apparent respite for property developers. For example, Shanghai may raise the cost of owning property to reduce speculative demand, according to the local Ministry of Land and Resources and the Oriental Morning Post. This could be achieved by a mix of financial, taxation and land measures. Developers share prices fell again, albeit gold and coal producer rose on speculation resource companies will benefit as inflation quickens. The background noise of Everbright Bank’s very successful IPO on Wednesday also helped. Everbright is China’s 11th largest lender by assets and the last of the Country’s major national banks to be floated.

Elsewhere, Nomura says China’s currency reform places it on the cusp of a ‘Big Bang’ as it allows foreign investors increased access to its domestic market. The term “BB” was coined in London in 1986, when the equity market was deregulated.

Eight months to go.

Shanghai Composite:
Today: +0.81% at 2,687.98 at close
This week: +3.1%
YTD: -18.0%

Hang Seng:
Today: +0.24% at 21,072.46 at close
This week: nc
YTD: -3.7%

Oil: $75.88
Gold: $1232.20
Euro/$: 1.2812

Headlines

• China inflation reduces prospect of monetary easing, says Deutsche Bank
• China says Q3 industrial material prices will be generally stable
• Finance Ministry makes statement that the risks from local government loans are controllable
• Bad bank loans may double on local government finance, says 21st Century
• PBOC sells three month bills at unchanged 1.5704% yield
• Finance Ministry sells seven year Government Bonds at a yield of 2.81%
• China currency reforms may mark the beginning of a ‘Big Bang' says Nomura
• China may introduce import stimulus in September
• Li Ka-Shing makes $979 million bet on Hong Kong housing market, picking uo two sites at auction
• Taiwan stocks are poised for a “golden decade” due to economic agreement with China, says CLSA