Mark Twain says

Mark Twain said “October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February”. Under pressure, though, he did make an exception for Shanghai; and in October 2010 it is nearly 12% to the good (so far). More significantly the market is now more than 25% up on 5 July and within sniffing distance of 3,000. There are three reasons for this: growth, growth and growth; and I could add “relative” to each of those, with a fair dollop of “liquidity”. On the latter point, too, Foreign Direct Investment or FDI rose 6.1% in September and 16.6% in the first nine months of the year to reach $74.3 billion.

“Buy land, they’re not making it any more” was another of Twain’s quips and latest data from China’s real estate market bears this out. Property prices rose 0.5% in September (the first increase since May), albeit on an annualised basis the gain was 9.1% down from August’s 9.3% and April’s record 12.8%. Meantime, transactions soared 52% in September, although year-on-year the rise was 16.6% and, in the first nine months of 2010, the increase was 8.2%. There is plenty here for hawk and dove alike. In the former camp, are those commentators who say the Government will clamp down further and harder on the property sector; while the latter are more pragmatic, saying there are already signs of cooling and that further fiscal restraint will be at the margin. I think the second view is more tenable.

Meantime, the Yuan remains in the spotlight, especially as China’s trade surplus with the US reached a new record of $28 billion in August. The currency added 0.1% to 6.6472 as of 10.14 hours, contributing to a 0.4% advance for the week; and at one point touched 6.6463, the strongest level since 1993. The US Treasury Report, which is expected to label China as a currency manipulator, is due out tomorrow. On this, too, I like the opinion of Gene Ma from International Strategy & Investment Group. He says the US has three choices: “yes” China is a currency manipulator; “no” it isn’t; or “delay” publication. He plumps for “delay”, saying that if it is “yes”, the risk is a political firestorm.

“The reports of my death are greatly exaggerated” - MT

Shanghai Composite:
Today: +2.03% at 2,971.06 at close
(best since 29 April 2010)
This week: +8.5%
Since 5 July: +25.7%
YTD: -9.3%

Hang Seng:
Today: -0.45% at 23,744.92 at close
This week: +3.5%
YTD: +8.6%

Oil futures: $82.95
Gold futures: $1379.00
(new ‘immediate delivery’ high of $1387.35 on 14 October)
Euro/$ spot: 1.4140

HEADLINES

• September property prices rise 0.5% in month and 9.1% year-on year
• FDI rose 6.1% in September; and 16.6% in first nine months to reach $74.3 billion
• China's trade surplus ($28 billion) with US reaches record for first time in two years
• Conference Board leading index shows preliminary advance in August by 0.7% to 149.9
• Europe must secure resources to counter Chinese competition, says Merkel
• China says, Japan is in no position to criticise Yuan policy as trade surplus with China continues for an eighth year
• Agile Property sees contracted sales rise 59% to Yuan 20.2 billion
• Gemdale wins Shanghai residential building site with Yuan 2.29 billion offer
• Dalian Port seeks Yuan 37 billion in Shanghai IPO
• Record loans in Hong Kong driven by cost, availability and mainland companies

- Iron & Steel

• Rio and BHP have not decided what to do yet after Germany said it would object to their iron ore JV