Back at work

Fresh from vacation, European sovereign debt scared just about everyone in the office yesterday; and out of sight has clearly been (albeit irrationally) out of mind. The contagion also spread to China where the Shanghai Composite eased back from a near four month high (and a whisker under 2,700). Nor did domestic news help, with 21st Century saying that a second round of measures to control the property market may now be introduced in the face of a continued surge in sales and prices. Similarly, the CBRC is reportedly drafting a plan which will require banks to maintain loan-loss reserves of 2.5% of total lending. At this time, only one (AgriBank) of the five largest State-owned banks exceeds this tally and, if introduced next year, it will reduce profits and restrict loan growth.

Elsewhere, steel company share prices eased, too, after Monday and Tuesday’s surge on production constraints and higher product prices. There was also caution from the Government on the economy with the Ministry of Industry talking about a slowdown, and VP Xi saying that, while there are positives, “the global recovery isn’t yet firmly established”. The Yuan is also being kept firmly under control (despite US fretting) with the reference rate seeing the steepest cut (0.16%) since 12 August; again with a weather eye on Euro sovereign debt. That said, the Chinese currency will soon be tradable with the Russian Ruble. Also on a positive note, Ernst & Young says that China is the most attractive country in which to invest in renewable energy.

And, finally, as Elbert Hubbard said “no one needs a vacation so much as the person who has just had one”.

Shanghai Composite:
Today: -0.11% at 2,695.29 at close
This week: +1.5%
YTD: -17.8%

Hang Seng:
Today: -1.46% at 21,088.86 at close
This week: +0.6%
YTD: -3.6%

Oil futures: $73.41
Gold futures: $1260.30
Euro/$ spot: 1.2684

Headlines

• Surging property sales trigger speculation of further tightening
• Property collateral is being used for consumption loans to fund third homes, says China Business News
• Yuan drops as China resists US pressure
• Yuan trading against Russian Ruble said to start within weeks in Shanghai
• Industrial output slowdown will deepen in H2, says Ministry
• Global economy emerging from “shadow” of crisis, says China VP Xi Jinping
• CBRC to require 2.5% loan-loss reserves, says Guosen
• Repurchase rate rises
• PBOC sells one year bills at unchanged yield of 2.0929%
• China takes top spot from US in Ernst & Young’s ranking for renewable energy
• Gates and Buffett to issue public explanation for trip to China
• Yangzijiang rises in debut of first China company to sell shares in Taiwan