Mining and timing

More than one billion TV viewers, it is estimated, watched the dramatic and heart-warming rescue of 33 miners in Chile after 69 days under ground. In China, on Saturday, 26 coal miners were killed in a gas explosion in Henan province; and 11 remain trapped as rescuers battle inflammable gases to reach them. The juxtaposition is too painful to bear. Unsurprisingly, too, Chile’s avuncular President, Sebastian Pinera, has offered help and assistance. Nor am I saying that Chile has a perfect safety record, it does not; albeit China does have the worst (seven deaths per day in 2009 versus 18 per annum in the US). It is simply the tragic coincidence and divergence of the two events which is so striking.

China is different, we all know that: bad and good; and its scale and speed of development are compounding factors. Mine safety is clearly in the bad camp, whereas a Yuan 1.04 trillion ($156 billion) increase in household deposits in September is, unqualifiedly, in the good. It is also the biggest rise in seven months and takes the total to Yuan 29.9 trillion. In turn, this gives cause to believing that the current share price rally and bull market (+25% since 5 July) will continue. What is more the Shanghai Composite edged above 3,000 this morning, albeit dipping lower on the day.

Developers remain popular, too, especially their US dollar bonds which are outperforming the debt issues of more general companies. S&P also says that China’s property companies can withstand price declines of as much as 10% in major cities over the next 12 months because they have “adequate liquidity and have already locked in the majority of their revenue for 2010”. And this, despite Guangzhou being the ninth city to limit new home purchase to one per household; you also have to be over 18 and have lived in the City for a year or more.

The other big news is the fact that the US Treasury Department has said it will delay a report on international currencies - which was due out on Saturday - and expected to label China as a currency manipulator. At the same time, the Treasury referred to progress in the acceleration of the Yuan’s rise. The report will be delayed until after meetings of the Group of 20 nations on 11 through 12 November (although no date has been given). The Yuan has risen by some 2.8% since 19 June and Yuan Forwards are pointing to a further 3.9% over the next 12 months. On Friday we quoted the prescient Gene Ma from International Strategy & Investment Group who said that the US had three choices: “yes” China is a currency manipulator; “no” it isn’t; or “delay” publication of the report. He plumped for “delay” saying that if it was “yes”, there was risk of a political firestorm. Three points and a captain’s badge are on their way to Gene.

“Timing, degree and conviction are the three wise men in this life” - R. I. Fitzhenry

Shanghai Composite:
Today: +0.18% at 2,976.44 at close
(best since 23 April 2010)
Last week: +8.5%
Since 5 July: +25.0%
YTD: -9.8%

Hang Seng:
Today: -1.21% at 23,469.38 at close
Last week: +3.6%
YTD: +7.3%

Oil futures: $80.61
Gold futures: $1360.90
(new ‘immediate delivery’ high of $1387.35 on 14 October)
Euro/$ spot: 1.3977

Headlines

EQUITIES

• Shares are on a roll - as household deposits in September rise by Yuan 1 trillion

YUAN & ECONOMY

• US delays currency report with reference to Chinese progress on the Yuan
• Yuan Forwards rise and point to 3.9% currency rise over 12 months, as PBOC signals its policy of gradual appreciation
• September inflation may be about 3.5%, says Shanghai Securities News/NDRC
• China says US trade complaint on clean energy policy is “irresponsible”; plus 100% duties are to be added to Chinese steel pipe imports
• China says its medium and heavy rare earth reserves may last only 15-20 years
• China increase study on carbon market with PBOC funding
  

REAL ESTATE

• Chinese developer bonds continue their rally, as home prices continue to rise
• Guangzhou joins eight Chinese cities limiting the number of new home that can be purchased per household etc
• Disney to begin building in Shanghai

DOMESTIC

• China may appoint Xi to military post and lay ground for him to become the Nation’s leader
• China sets about testing political and social reform in City of Shenzhen, says WSJ
• China wants to maintain ties after thousands of Japanese and Chinese protest
• Environment-risk-insurance pilot plan commences in eight Cities, says CIRC
• Rescuers battle gases to reach 11 miners trapped for three days in China
• City sues Zijin Mining over dam break
• China increase study on carbon market with PBOC funding

HONG KONG & TAIWAN

• Hong Kong sees surge in existing home sales, despite Government controls
• “Farewell to the long lunch” is most likely for Hong Kong traders
• 43 firms with mainland China operations prepare to sell shares in Taiwan

IRON & STEEL

• BHP and Rio drop iron ore JV due to regulatory rejection