Man and a van

“Economists use decimal places, to show they have a sense of humour”, quipped David Wyss of S&P, while at the same time underlining his 10.3% GDP growth forecast for China this year. He also said that comparisons of H2 2010 with H2 last year are misleading – because the comparative period saw a sharp recovery. He also said that China had pretty much grown at an average 9% per annum for 30 years and saw little reason why this would not continue. Yes, there are domestic risks such as property prices and a parsimonious consumer plus, internationally, he now says there is a 30% chance of a ‘double-dip’ in the US (up from 20% two weeks ago).

Citic Bank was also cautiously positive, particularly on wage growth and ‘the mother-in-law’ impetus to the housing market (they buy jointly with siblings). Similarly, Credit Agricole says that the interest rate swap market is over-estimating the degree of slowdown in China. Of more concern, though is the seven day repurchase rate which has risen a further 36 basis point to 2.2% ahead of the ICBC bond sale from Tuesday. Still a country which has eight days traffic jams, on the Beijing-Tibet Expressway, must be busy (I avoided saying ‘slowing down’).

Finally, I would also like to make a rare Tony-Williams-Award to Mr Zhao of Jining who paid Yuan 100,000 for a new van in notes with a face value of one Yuan or less. This, also, further supports the ‘cash and the Chinese mattress’ theory. Let’s hope more follow suit.

Shanghai Composite:
Today: +0.28% at 2,610.74 at close
This week: -1.2%
YTD: -20.3%

Hang Seng:
Today: -0.07% at 20,597.35 at close
This week: -1.8%
YTD: -5.8%

Oil futures: $73.13
Gold futures: $1236.90
Euro/$ spot: 1.2712

Headlines

• S&P is pragmatic on China; and retains 10.3% GDP forecast for 2010
• Rising wages may prevent property slump, says Citic; although growth and prices will slow
• Interest rate swaps point to an over-estimate of any slowdown in China, says Credit Agricole
• Loan target is intact
• Money market rate gains the most since June ahead of ICBC bond sale
• China to allow companies to keep foreign currency income overseas - in a trial
• Property controls still pending
• China plans reform of production and consumption taxes, says Securities Daily
• Eight day traffic jam
• Man and a van