"There is no news today"

Once upon a time when the BBC was only a radio station, dinner suited news-readers would often announce “there is no news today”. This is unfathomable today and, especially in a country of 1.3 billion – where there is always news; and today lots and lots of it.

Most important, too, is the larger-than-expected trade surplus of $27.1 billion for October and the second biggest this year. And although imports rose faster than exports (despite lower domestic demand for oil), these data are unlikely to win friends and influence people when the G20 meet begins tomorrow. Not so GE, however, which is set to invest a further $2 billion in China or British Prime Minister David Cameron who oversaw a $750 million deal between Rolls Royce and China Eastern on his trade mission to the PRC.

In part recompense, the Yuan hit its highest level (6.6405) against the US dollar since 1993; albeit that it will still be a talking point. Behind the scenes, too, the PBOC is reported to have ordered some lenders to increase their reserves ratios by 50 basis points from 15 November. Merrill Lynch says the Bank wants to lock up money flowing into China and the odds of another interest rate hike might now be lower. In a belt and braces moves the wonderfully named SAFE (State Administration of Foreign Exchange) is to introduce new rules to tighten the control of overseas cash inflows, which include forcing the banks to hold more foreign currency and strengthening auditing of overseas fund raising. The measures underscore concern around the World that the US Federal Reserve’s expanded monetary stimulus will cause capital to flood into emerging markets. In what may be a fit of pique, too, one of China’s three largest credit rating agencies, Dagong Global, has downgraded the US from AA to A+.

Turning to real estate, home prices in 70 cities climbed 8.6% in October (year-on-year) and 0.2% on the month. This compares with 9.1% and 0.5% respectively in September. Property investment in China in the first 10 months of the year was also ahead by 37% to a staggering Yuan 3.81 trillion ($577 billion). Developers shares fell early on by around 3.0% because higher interest rates and other controls introduced by the Government have yet to have an impact; ergo there will be more to come, some of it organised at local level. That said, my view is that it might be more sensible to wait longer until the early medicine has had its full effect.

Unsurprisingly, the Shanghai Composite was off today by 0.6%. Investors also have a weather eye on the Nation’s inflation data which are released tomorrow and the CPI could be at 4.0% - the highest in two years - or even 4.4% according to Merrill Lynch. The Government’s full year inflation target is 3.0%. Rapid rises in food prices are to be blame. The swaps market has already discounted higher interest rates (in fact, four hikes in the next 12 months).

On a brighter note, Chinese stock investors opened 449,905 accounts during the week ended 5 November, which is the most in a year. Plus all vehicle sales rose 25% to 1.54 million in October, year-on-year, and the Government is to insist of increased dividends from SOEs or State-owned Enterprises. Last year the Government collected Yuan 98.9 billion ($15 billion) in this way and collecting even more of it from this source will make funding of the new five year plan so much easier.

Finally, I return to Anthony Bolton the master investor who is now directing Fidelity’s investments in China – and from early April to 9 November, his fund returned 27%. And with his apologies to Mark Twain, Bolton also said: “history never repeats itself, but it sometimes rhymes”.

Shanghai Composite:
Today: -0.63% to 3,115.36 at close
This week: -0.5%
Since 5 July: +31.8%
YTD: -4.9%

Hang Seng:
Today: -0.85% to 24,500.61 at close
This week: -1.5%
YTD: +12.0%

Oil futures: $86.93
Gold futures: $1401.30
(new ‘immediate delivery’ high of $1424.60 on 9 November)
Euro/$ spot: 1.3780

HEADLINES

YUAN & EQUITIES

• Yuan rises to best level (6.6405) since 1993 as China allows gains ahead of G20
• Fidelity and Bolton defy China bears with 27% new fund return

BANKS, MONEY & BONDS

• China is reported to have ordered some banks to raise reserve ratio
• It will also tighten control on inflows of overseas funds
• The Nation should tax short term capital inflows, says PBOC advisor….and 2011’s monetary policy should be more prudent
• China’s Dagong lowers US credit rating on Fed monetary policy
• Convertible bonds leading market amid gains in Yuan and shares, says China Credit
• Swaps point to rates rising four times in next 12 months
• PBOC raises one year bill yield for second time in three weeks
• Finance Ministry sells one year bonds at 2.15% yield
• World Bank says Asia may need capital controls

ECONOMY

• China's trade surplus in October jumps to a larger-the-expected $27.1 billion ahead of G20 leader summit
• China’s October crude oil imports decline from record in September to lowest level in 18 months

REAL ESTATE

• China's home prices slow to 8.6% in October
• RCM sees surge in public housebuilding in China; but fears bubble in Hong Kong
• China to allow local governments to control home price gains

DOMESTIC

• China’s October passenger-car sales rise 27% on incentives
• Made-in-China passenger vehicles prices fall 2.4% in October
• State-owned firms to be ordered to pay more dividends
• China plans national freeway and a high speed rail network
• UK PM Cameron secures trade deals with China
• GE to invest $2 billion in China
• Timberland to at least double stores in China to more than 200
• Miramar to Spend $39 Million on China expansion

HONG KONG

• Hong Kong office sells for record $3,300 per square foot, reports Standard
• Hong Kong sales of homes worth $2.6 million or more soar 86% in seven months to end-October
• Can’t buy a house in China, therefore go to Hong Kong