Not Slim Pickens

Slim Pickens (aka Louis Burton Lindley Jr) was an American actor who epitomised the tough cowboy, but who is best remembered for his comic roles, notably in Dr Strangelove, 1941 and Blazing Saddles. Carlos Slim, on the other hand is the World’s richest man, estimated by Forbes to be worth $53.5 billion. He is also a Mexican-based telecommunications titan and something of an oracle.

He was speaking at an economic forum in New York at the weekend and advocated that China take steps to boost domestic demand rather than let the currency appreciate as a means of improving global trade. “Competitive devaluations won’t succeed and could spur inflation should commodity prices remain high. If China salaries get increased and people work less they will have more time and more money to spend. This domestic demand will also help other countries in the World”.

Slim also criticised the US for relying on Government spending rather than private investment. “In the new society you need competition, innovation, technology and flexibility and the private sector is who can manage that. The Government doesn’t have the flexibility”.

Rich food for thought and by way of desert we had two very positive PMIs today (Logistics Federation: 53.8 to 54.7 in October; and HSBC/Markit: 52.9 to 54.8) which showed Chinese manufacturing expanding at its fastest pace in six months. Then, the stock market added the cream with a rise of 2.5% to clear of the 3,000 mark once more. As if the data had been listening to Slim, too, while manufacturing was buoyant, a sub-index of export orders slipped by 0.2 (to 52.5); albeit a reading above 50 still indicates expansion. In the more worrying camp, however, input prices rose the sharpest of all 11 sub-indices by 4.6 points to 69.9.

Similarly, some commentators believe that CPI will have hit 4% in October, up from 3.6% in September. This may mean a further rise in interest rates before the year end. However, the consensus view is that the economy - and stock market - can take this in its stride together with an appreciating Yuan. For example, the NRDC has pencilled in 9.5% GDP growth next year and Goldman Sachs is forecasting a 27% rise in the CSI 300 Index next year to 4,300. Coca-Cola agrees and is likely to spend more than its allocated $2 billion in China in 2009-11. Similarly, Shanghai has just closed the World’s most visited Expo.

Finally, I will leave you with investment legend Anthony Bolton of Fidelity who is now based in Hong Kong and investing his firm’s cash in China. In a rare interview, he said “if I’m right about China - and like anything, predicting the future is a risk - I think it’s going to be the demand economy in Asia over the medium term. There is always pressure in this business and there is no automatic way to generate profit, but I didn’t want to be standing here in 10 years time thinking I could have done it”.

Shanghai Composite:
Today: +2.52% to 3,054.02 at close
(best since 16 April)
Last week: +0.1%
October: +12.2%
Since 5 July: +29.2%
YTD: -6.8%

Hang Seng:
Today: +2.41% to 23,652.90 at close
Last week: -1.8%
October: +3.3%
YTD: +8.1%

Oil futures: $81.88
Gold futures: $1362.60
(new ‘immediate delivery’ high of $1388.10 on 14 October)
Euro/$ spot: 1.3968

HEADLINES

NEW DATA and MONEY

• Manufacturing accelerated in October, says PMIs
• Stocks start November brightly
• World’s richest man calls on China to boost domestic demand
• Anthony Bolton on investing in China: “the demand economy in Asia over the medium term”
• Chinese economy to growth 9.5% next year, says NRDC’s State Information Center
• China clamps down on speculation in agriculture futures as prices hit record highs
• China's 2010 foreign trade will rise 25% to around $2.8 Trillion, says Ministry of Commerce
• Inflation to hit 4% in October says researcher; thereafter views differ
• China should buy gold and oil to avoid US dollar losses, says China Construction Bank
• CIC’s Zhou says that the US should spend much more on its own infrastructure

INTERNATIONAL

• Obama to meet Hu one-on-one on 11 November at G20
• China can agree with US on trade imbalance and move forward, says PBOC adviser
• Efforts are made by the US and Japan to calm tensions with China over territorial disputes ahead of G20
• EU says China needs to look to its global responsibility

REAL ESTATE

• Vanke’s property sales may exceed Yuan 100 billion this year with 58% rise
• Second homes loans to attract maximum floating rate

DOMESTIC

• China's investment in power is estimated that it will fall slightly this year to $99 billion
• China to cut taxes next year to improve employment, says Finance Ministry
• Coca-Cola may increase China investment faster than expected; it has allocated $2 billion for 2009-11
• Shanghai's World Expo closes after bringing in record 72 million visitors

HONG KONG

• Hong Kong currency peg to US dollar debate intensifies as Yuan deposits soar
• Hong Kong's mortgage approvals plunge 22% in September

IRON & STEEL

• Iron ore shipments to China rise 18% in September and growth will continue says Pacific Basin
• Shipping costs dip after surge since the summer
• India seeks ban on iron ore exports as domestic demand rises
• Baoshan Iron & Steel dips in Q3 but forecasts highest annual profit in three years
• South Africa sees iron ore exports recover and, in turn, drive unexpected trade surplus