TTD;TTW

A topsy turvy* day in a topsy turvy* week…..which looks set to close narrowly ahead of were it started on Monday. Within that, too, a sub-index of property stocks, which forms part of the Shanghai Composite, is headed for its worst week (-4.2%) in three months after the banking regulator reiterated higher down payment and mortgage rates for purchases of third homes (last month, real estate shares bounced 18% from their 2010 low on 1 July).

For its part, the China Banking Regulatory Commission said banks can decide on their own whether to stop mortgage loans to buyers of third homes, based on risk conditions. Similarly, down payment ratios and mortgage rates for such homes should be increased to “a large extent”, it said.

“The Government is in a dilemma as it does not have much maneuvering room to manage the economy given an accelerating inflation outlook” said Dazhong Insurance. “There isn’t a big possibility that there will be dramatic loosening of current policies”. BNP Paribas agrees saying that “China is unlikely to relax existing real estate industry policies anytime soon and the strict implementation of these measures may damp a recent recovery in sales, disappointing investors. We expect the sector will be under downward pressure in the short term”.

However, BNP analysts also say that China’s developers may report a 38% gain in H1 profit. Similarly, China is unlikely to issue new tightening measures for the property market, according to Zhu Zhongyi, Vice Chairman of the China Real Estate Association. In the same vein, JPM’s Jing Ulrich does not believe the hype about a 60% fall in house prices; although in July they were off 1.32%.

Best of all, though, was the confidence of Hong Kong’s richest man: 82-year old Li Ka-shing (worth $21 billion) who is regarded as a “Superman” due to his investing skills. He was speaking at announcements by his companies Hutchison Whampoa and developer Cheung Kong (which owns 49.9% of the former) and was in robust mood, as was his son, Victor, who is Vice Chairman of Cheung Kong. At the meeting, Li (Senior) said he was optimistic about the World economy and China’s growth; and was also “full confidence” in China’s banks. “Don’t worry” he said and reminded his audience that the largest shareholder in these banks was the PRC Government. His son also said that the property market in China did not feel like a bubble and by far the majority of its buyers were “users” not “speculators”.

Finally, China’s stock-index futures rose, signalling the benchmark indices may pare a weekly loss, on the prospect that corporate earnings will withstand a slowdown in the economy. For example, H1 corporate earnings have beaten market estimates and that has led to good expectations about profits in Q3.
*turned or positioned upside down

Shanghai Composite:
Today: 1.23% at 2,653.10 at 14.02
This week: +0.6%
YTD: -19.0%

Hang Seng:
Today: +0.56% at 21,671.55 at 12.35
This week: +3.1%
YTD: -0.9%

Oil:
$82.23
Gold:
$1199.66
Euro/$
1.3190

Headlines

• China car sales to rise 10% in 2010
• House prices dip 1.32% in July
• JPM’s Ulrich says house price drop of 60% “very unlikely”
• PBOC predicts inflation risks as economy is stabilising
• China may commence environment tax trial in four provinces
• China car sales to rise 10% in 2010