Bountiful 3,000

Ovid said, “take rest; a field that has rested gives a bountiful crop”; and Shanghai is clearly both classically educated and a good listener. That is, after yesterday's pause for breath (closing down 0.5%), today, the stock market surged back through 3,000 for the first time since April – and all in the last hour of trading. At the same time, JPMorgan and Citigroup moving from “neutral” to “underweight”. Similarly, the lyrically named fund manager, Bosera, says every dip is a good opportunity to buy large-cap stocks. This means it should have been buying property developers in morning trade when their sub-Index, within the Shanghai Composite, dipped for the first time (-1%) this month. The reason it fell was a report, from Caixin Online, that property tax trials will begin early next year in Shanghai and Chongqing (but is this really new news?).

Elsewhere, the Communist Party concluded its annual knees-up and anointed Hu’s successor in making Xi Jinping head of the army. It has also put the finishing touches to spending plans for the next five years and said that China will boost domestic demand to continue China’s economic growth, look to domestic welfare and “actively participate” in global economic governance. And, as Societe Generale points out, consumption as a percentage of the economy is less than 40% compared with some 70% percent in the US. That said, Deutsche’s Ma Jun is worried about the impact on profit growth. There is also scepticism about proposed energy reduction targets of 17.3% (as a unit of GDP) from 2011 through 15.

The weight of capital flows from developed to emerging markets remains an issue, too, and Tim Geithner has been on his ‘bash-China-soapbox’ again, saying that the Yuan is creating “a playing field that’s unbalanced”.

Finally, there was a tragic update this morning from Henan where all 37 coal miners have now perished.

Shanghai Composite:
Today: +1.58% at 3,001.85 at close
(best since 21 April 2010)
This week: +1.0%
October: +13.0%
Since 5 July: +27.0%
YTD: -8.4%

Hang Seng:
Today: +1.25% at 23,763.73 at close
This week: 0.0%
YTD: +8.5%

Oil futures: $82.79
Gold futures: $1369.70
(new ‘immediate delivery’ high of $1387.35 on 14 October)
Euro/$ spot: 1.3920

Headlines

• China’s “laggard” stocks are upgraded from "neutral" to "underweight" by both JPMorgan and Citigroup
• Property tax trials to begin next year in Shanghai and Chongqing, says Caixin Online
• PBOC speaks of “vicious cycle” of capital flows from the developed to emerging markets
• Geithner says nations cannot devalue their way to prosperity; and openly criticises China
• China feels strain in rush to save energy, says FT
• Xi is duly awarded the top job in the military; and becomes Hu’s anointed successor
• Party says it will boost domestic demand to continue China's economic growth, look to domestic welfare and “actively participate” in global economic governance
• Deutsche Bank is worried about impact of new five year plan on corporate profit growth
• Environmental tax may be included in the new plan
• China says it has no plans to cut rare earth export quotas in 2011; after a 40% reduction this year
• All 37 miners are dead in Henan coal mine explosion