The one about the expensive vase and Obama

$83.2 million was paid by a Chinese buyer, at auction, for a Chinese vase which was found, by accident, in an attic in north London. Apart from the wonderful good fortune for the owner, it also shows that Chinese bidders are prepared to pay ever-higher prices for rare and precious artifacts associated with Chinese emperors; and this one was from the 18th Century Qianlong-dynasty. It also shows that some, at least, can afford to.

Value, like most things, is relative and subjective. I, for example, would rather invest $83.2 million in contemporary China; as would Barack Obama. He said “in the US we should be able to agree now that it makes no sense for China to have better rail systems than us. And we just learned that China now has the fastest supercomputer on Earth. That used to be us. Do you think China is cutting it by 20%? They’re playing for first place, and we need to play for first place”.

President Obama has also been busy at the G20 summit, where he met face-to-face for 80 minutes with President Hu. Gossip suggests, too, that if it had been a boxing match, Hu probably won on points. For example, China rejected policy prescriptions which find fault with its exchange rate policy and, in turn, directed criticism at monetary easing in the US. Off the record, too, the US has said that it is encouraged by the recent appreciation of the Yuan. It also seems that G20 leaders will endorse only gradual changes in currency values, in its official statement. They have also agreed to develop early warning indicators to monitor policies which exacerbate trade imbalances and threaten to disrupt the global economy.

But all is not that smooth for Hu and, back home, he will have seen that the Shanghai Composite dropped 5% today (to below 3,000) as expectations grew that interest rates will rise, perhaps even today (after hours). In any event, a Bloomberg survey said that the consensus view of 11 analysts was that the one-year borrowing rate would rise from 5.56 to 5.81% by year-end. This follows yesterday’s inflation number of 4.4%, the highest in two years and Credit Suisse, for one, thinks that it could go to 6.0% by the middle of next year. Meantime, the Yuan has completed a second week of advances and along the way touched its strongest level (6.6173) since 1993. However, the Non-deliverable Forwards market is pointing to further gains of just 2.1% - the lowest since September.

Unsurprisingly, real estate shares took a thump added to by new proposed restrictions on foreigners being able to own only one house; and despite a bullish survey. The latter said that while two-thirds of Bloomberg users canvassed see a bubble inflating property values in China, 33% of them also say that it is the best country for investment. JPMorgan adds, too, that it thinks the worst may be over for Chinese property stocks based on the view that market restrictions will not be repeated in the second half of next year.

“Don’t make other people take the medicine for your disease” - Yu Jianhua who is a Director-General at China’s Ministry of Commerce (speaking at the G20)

Shanghai Composite:
Today: -5.16% to 2,985.44 at close
This week: -4.6%
Since 5 July: +26.3%
YTD: -8.9%

Hang Seng:
Today: -1.93% to 24,222.58 at close
This week: -2.6%
YTD: +10.7%

Oil futures: $85.86
Gold futures: $1382.20
(new ‘immediate delivery’ high of $1424.30 on 9 November)
Euro/$ spot: 1.3631

HEADLINES

EQUITIES

• China’s stocks drop most in three months on prospect of immediate interest rate rise
• Goldman Sachs tells investors to close their position on China stocks after an 11.3% gain since April

YUAN, BANKS & MONEY

• Yuan sees second week of gains
• China set to raise interest rates again, says survey
• Finance Ministry sells 182 day Treasury bills at 2.0387% yield; compared with 1.99% in secondary market
• Finance Ministry sells the last of 2010 local government debt as yields rise

G20

• G20 takes baby steps towards currency accord
• Obama cites China as role model

REAL ESTATE

• Foreigners to be limited to one property for self use
• China real estate bubble fails to put off investors, says survey
• Buy China property stocks, says JPMorgan: the “worst” appears to be over

HONG KONG

• Hong Kong’s Q3 GDP growth may top 6%
• Hong Kong is to take action on property speculation

IRON & STEEL

• China’s iron ore imports dip 2.2% in 10 months to end-October
• Steel inventories in China fall 24% from peak
• Baoshan holds prices despite inflation
• China to increase use of scrap steel use to lower iron ore reliance, says Nanjing Iron & Iron
• African Minerals raises £191 million from placing for iron ore project; China Railway Materials Commercial is already an investor and Shandong Iron and Steel is thinking about it