"Big Brown"

UPS or United Parcel Service (aka ‘Big Brown’ - due to its livery) is the World’s largest package delivery firm with 15.1 million ‘drops’ per day; plus it is a top 10 global airline in its own right. UPS is also one of the World’s most admired companies, which shows that you can be big and good. And, it has now turned its attention to China and, this week, will apply for a domestic licence. The Company believes the current potential of this market is 5 million packages per day or a third of its global volumes at this time. Do you need any further affirmation of China’s potential?

In other news, the HSBC/Markit PMI shows manufacturing increasing for the second consecutive month. A number of good things are happening in the economy, too, including a Government push to finish off its last round of fiscal stimulus ahead of formulating a new five year plan in 2011. Public housebuilding is also receiving a welcome nudge. Meantime, inflation has increased, as noted by the PMI - especially at the input level - but Morgan Stanley says it may have peaked in August and will edge down slowly for the rest of the year.

Elsewhere, Yuan Forwards perked up ahead of the vote in the US House of Representatives today. The former are pointing to 2% appreciation over 12 months in addition to the 2.1% already achieved since 19 June (which could well be the sum of it). In any event, the independent Congressional Budget Office says that proposed legislation aimed at an ‘over-valued’ Yuan, may raise no more than $20 million a year in duties because many goods are no longer made in the US.

“A hidden connection is stronger than an obvious one” - Heraclitus of Ephesus

Shanghai Composite:
Today: -0.03% at 2,610.49 at 14.41
This week: +0.7%
YTD: -20.3%

Hang Seng:
Today: +1.14% at 22,361.16 at 14.36
This week: +1.1%
YTD: +2.2%

Oil futures: $76.52
Gold futures: $1311.30
(new ‘immediate delivery’ high of $1,311.90)
Euro/$ spot: 1.3581

Headlines

• Yuan Forwards rise again and point to a further 2% appreciation (on top of the 2.1% since 19 June)
• China currency bill to have only limited impact, says US agency i.e. new potential import duties to raise only $20 million per annum
• IMF sees no “big risk” of global round of currency devaluations; views Yuan as “undervalued” but acknowledges China’s shift
• UPS to enter China’s delivery market which is “worth billions”