31

“31” means working very hard i.e. 24+7 = 31. Such wisdom comes from Jake Harper who is the “half” in the sharp US sitcom “Two-and-a-half-men”. Tim Geithner is a fan too, he tells me, but his abbreviation for hard work is “G20” and, specifically, the finance ministers' unit which concluded its travails on Saturday in South Korea (ahead of the Grand Prix).

Here, they all agreed (save for Japan) to avoid competitive devaluations as a means of boosting exports (okay, it is not a sharp toothed initiative but will, nonetheless, ease indigestion). The IMF was also there and - “in its biggest reform ever” - agreed to increase the role of emerging markets through the fact that Europe has surrendered two seats on the executive board and 6% of the vote moving their way. However, the G20 did not adopt Geithner’s plan to set numerical targets (of circa 4%) for current account surpluses or deficits but did say it would work to reduce excessive imbalances; and it has also initiated the development of a “financial safety net” to stop nascent financial crises.

Still hawkish, but polite, on the Yuan, Geithner made an unscheduled visit to Qingdao yesterday to speak with Vice Premier Wang; which is unambiguously a good thing. This morning, too, Yuan Forwards have regained their poise and are pointing to a further 3.4% appreciation. Don’t expect a surge but such movement dramatically reduces tension and, hopefully, eases domestic inflation (hot money flows aside). It is also a building block in domestic demand creation. The latter is a major objective of the Country’s new five year plan (on which the ink is drying) and the Shanghai Composite reflected investor anticipation of it today, especially in consumer and technology companies, as it waltzed through 3,000 once more to a new six month high.

Credit Suisse (which is looking for 3,600 in Shanghai) and CICC are bullish too, albeit developers remain under the cosh of, perhaps, an even earlier trial of a property tax (and despite eastern China’s CJ Land looking set to raise $618 million in a Hong Kong IPO).

Finally, and also on a positive note, yields on China’s corporate bonds are falling at a record pace relative to Government debt as regulators allow insurance companies to boost their holdings of the securities. The premium investors demand to hold 10 year notes issued by companies rated AAA, instead of sovereign debt, has reduced by 49 basis points this year to 89 basis points, as of last week – which is the biggest annual drop in Chinabond data going back to 2006.

“There is no season when such pleasant and sunny spots may be lighted on and produce so pleasant an effect on the feelings, as now in October” - Nathaniel Hawthorne

Shanghai Composite:
Today: +2.57% at 3,051.42 at close
(best since 16 April)
Last week: +0.1%
October: +14.9%
Since 5 July: +29.1%
YTD: -6.9%

Hang Seng:
Today: +0.47 at 23,627.91 at close
Last week: -1.0%
YTD: +8.0%

Oil futures: $82.80
Gold futures: $1345.60
(new ‘immediate delivery’ high of $1387.35 on 14 October)
Euro/$ spot: 1.4038

HEADLINES

G20, YUAN etc

• Yuan Forwards predict a further 3.4% appreciation
• G20 pledges to avoid devaluations to boost exports
• Geithner expects China to “continue to move” on the Yuan; as he hold unscheduled talks in China with Vice Premier Wang
• G20 split over Geithner's plan to set current account targets
• Geithner says US has special responsibility to support dollar
• IMF Reform in favour of emerging markets

SHARES & BONDS

• China stock index targets are raised by Credit Suisse; including 3,600 on Shanghai Composite
• China's “secular” trend is bullish for consumer shares, according to CICC
• BRIC stocks may double, says SocGen
• Corporate debt yields drop at record rate relative to Government debt

REAL ESTATE

• Developers decline on reports of trial property tax
• China Vanke sees Q3 net income rise 6%
• CJ Land plans $618 million IPO in Hong Kong

DOMESTIC

• China meets target of 70 million visitors to World Expo in Shanghai as nears its conclusion

HONG KONG

• Private home completions hit four yearAir pollution hits “very high” level of 11,100
• Air pollution hits "very high" levels of 109 in CBD