"Lunch is for wimps"

"LIFW" was the disdaining description of business mores from Gordon Gekko in Wall Street 1. And, in Hong Kong, they are clearly listening as the traditional two hour lunch break will be cut by 30 minutes next March and then by a further 30 minutes in March 2012 to a single hour. Was this the reason that Hong Kong fell 2.7% today to its lowest level since 7 October? I don’t think so. The market fell because of worries over the border in China and a domestic property sector being hammered by Government constraints. By way of a kindred spirit, the Shanghai Composite joined in with a near 2% drop to its lowest since 11 October as it - amazingly – settled at 2828.28…..Lucky for some?

Investors are worried that the Chinese Government will ratchet up its fight against inflation. This was evidenced by a People’s Daily editorial on its front page saying that the Nation should designate more goods as important commodities and intervene in prices where necessary. Citigroup also talked about the ‘supper cycle’ (as opposed to the ‘super cycle’). By this it meant that “when iron ore prices double, it hardly touches rural Chinese workers. But when food prices rise by 10-15% every year, it does”. Similarly, Standard Chartered is forecasting a consumer price index peak of 6.3% in June.

Already, too, the money markets are anticipating a further interest rate rise as the seven day repurchase rate, which measures lending costs between banks, advanced to 2.22% as at 10.23 hours in Shanghai, which is the highest since 8 October. That said, China International Fund Management believes that China’s economy may bottom out in the second quarter next year; and that “the market will seek support at a lower level in the short term as we are in the midst of very severe tightening”. Similarly Tesco remains positive on the PRC as it plans to quadruple sales by 2015 to £4 billion; and Rolls-Royce has just sold $1.8 billion of jet engines to Air China. Plus a 1,920 kilometre high speed rail link between Yunnan and Yangon, the capital of Myanmar, is due to commence construction work in two months.

It is also reported, but not confirmed, that - with 38 days to go in 2010 - China’s banks have already lend their PBOC limit of Yuan 7.5 trillion; which is good and bad.

Finally, as South Korea scrambles fighter jets due to the fact that its northern neighbour lobbed artillery shells into its backyard this morning (actually one of its back-islands called Yeonpyeong), it maybe time to don your tin hat, actual and figurative.

“The most valuable commodity I know of is information” - GG

Shanghai Composite:
Today: -1.95% to 2,828.28 at close
This week: -2.1%
In November: -5.1%
Since 5 July: +19.6%
YTD: -13.7%

Hang Seng:
Today: -2.67% to 22,896.14 at close
This week: -3.1%
In November: -0.9%
YTD: +4.7%

Oil futures: $81.07
Gold futures: $1363.70
(new ‘immediate delivery’ high of $1424.30 on 9 November)
Euro/$ spot: 1.3558


EQUITIES, BONDS, YUAN & BANKS

• Stocks fall to a six week low on tightening
• One year bill year sold at same yield of 2.3437%; but less of them are offered
• Yuan Forwards now at +2.6% as US dollar strengthens
• Yuan/Ruble trades begin
• China's bank “has reached” its limit of Yuan 7.5 trillion this year with a month-and-a-bit to go
• PBOC adviser Li says China can consider selling US Treasuries, as price rises

DOMESTIC

• China will meet 2010 energy reduction goal, says NRDC
• Rolls-Royce wins $1.8 billion engine contract for Air China
• Tesco plans to for a four-fold rise in sales from double the number of stores by 2015
• China to start work on Myanmar high speed rail project
• China’s rare earth exports fell by 77% in October

HONG KONG

• Hong Kong stocks decline for a third day
• Centaline halts expansion as is predicts Hong Kong home sales may halve from peak
• Hong Kong brokers see their lunch cut by 30 minutes (to 90) and an extension of trading hours from 7 March; a further 30 minutes will be cut in 2012