"Happy(ier) Holidays"

Posted on Friday, 1 October 2010 [GMT+1]

Another day, another positive PMI story; and this one - despite it being the holidays in both Hong Kong and China - is the Government version (and follows HSBC/Markit's on Wednesday). In any event, the headline was ‘manufacturing growing at the fastest pace in four months’ as the Index itself rose from 51.7 in July to 53.8 in August, which was also better than forecast. In terms of the sub-indices new orders were stronger than exports and there was a sharp increase in input prices: up from 60.5 to 65.3 (the biggest jump of all). This has promoted the currency appreciation bulls (eg ANZ) and the higher-interest-rate-brigade (including Merrill Lynch) to raise their heads.

Elsewhere, Warren Buffett is bullish on China saying that its transformation is “unlike anything that’s ever taken place in history”. Furthermore, his Dairy Queen unit intends to grow outlets by 60% through December next year (to reach 500). Plus Morgan Stanley’s very excellent Stephen Roach (a former colleague) said that the US Yuan legislation was “bad economics" and “bad politics”. That said, Tim Geithner believes that there will be no trade or currency war between the US and China (although he is not sure what the latter actually is). And, finally, large scale real estate purchases continue in China.

After this week, too, I can probably say “Happy(ier) Holidays”.

Shanghai Composite:
Thursday: +1.72% at 2,655.66 at close
Today: closed
This week: +2.5%
September: +0.6
Q3: +10.7
YTD: -18.9%

Hang Seng:
Thursday: -0.09% at 22,358.17 at close
Today: closed
This week: +1.1%
September: +8.8%
Q3: +11.1%
YTD: +2.2%

Oil futures: $80.42
Gold futures: $1311.00
Euro/$ spot: 1.3664

Headlines

• China manufacturing accelerates more than forecast
• Buffett expects large investment opportunities in China
• Dairy Queen to increase stores in China by more than 60% by next year
• Morgan Stanley's Stephen Roach calls Yuan legislation "bad economics" and "bad politics"
• Geither says there is no threat of a trade or currency war
• China says US anti-Yuan legislation will hurt World economy
• Shui On Land buys residential site in Hongqiao, Shanghai for $477 million
• Minmetals Land will pay $112 million for a new development site in Huizhou
• Yuan deposits in Hong Kong rise to record in August i.e. they have doubled in 2010, so far, to $130.4 billion
• Hong Kong put-options jump to 14 times the monthly average after Hang Seng reaches nine month peak