30 Seconds to Mars

“TSTM” are well on the way to being ‘the next big thing’ in music and on an artic night in London they played a truly outstanding gig at the O2 Arena – the World’s most successful live venue. The name apparently comes from a Harvard University thesis which examines expediential growth of technology as it relates to humans and predicts that it will, one day, literally take thirty seconds to travel all the way to Mars.

Expediential can be both a compliment and a pejorative. For example: using what you have at hand to gain a result - advantageous; or taking what you can rather than doing what is right – self interest rather than principle.

China’s growth has been a bit of both, depending where you sit, and today’s two sets of PMI data show that it is continuing - as manufacturing hit its highest level for seven or eight months. There was, however, a little sting in the tail insofar as input prices rose to their highest level since June 2008 or 2004 depending on which survey your read (Logistics Federation or HSBC/Markit). Credit Suisse calls this “alarming”.

Others were more sanguine. For example, Nomura said that China is in “a solid growth phase” even as inflation concerns rise, while Citigroup said that while inflation, mainly driven by food and global commodity costs, is “a critical policy worry,” the economy is not overheating as it did in 2007-08. Similarly, the NDRC said yesterday that nationwide price controls are not needed yet.

That said, China’s benchmark money market rate advanced to the highest level in two years with the seven day repurchase rate, which measures lending costs between banks, rising five basis points to 3.355% (this compares with 3.420% on 10 October 2008).

Standard Chartered forecasts one more increase in interest rates this year and three in the first half of 2011; it also predicts that Chinese banks’ reserve requirement ratios will be boosted by 50 basis points as many as five times. Credit Agricole has also doubled its projections for the number of interest rates increases by mid-2011 to four. In fact, inflation may have accelerated to 4.8% in November, says CICC. It may also average 5.5% in 2011, up from an estimated 3.2% this year, adds Standard Chartered.

But Nomura (again) is looking through the inflationary haze – and says that it will begin to clear next year, allowing the Government to unwind measures intended to cool the economy. “CPI is likely to peak out soon, which damps the need for drastic monetary policy action. We expect the room for monetary easing will emerge in the latter half of 2011”. Both Morgan Stanley and RCM Capital Management also like equities, especially emerging ones.

“A visitor from Mars could easily pick out the civilized nations. They have the best implements of war” - Herbert Prochnow

Shanghai Composite:
Today: +0.12% to 2,823.45 at close
This week: -1.5%
In November: -5.3%
Since 5 July: +19.4%
YTD: -13.8%

Hang Seng:
Today: +1.05% to 23,249.80 at close
This week: +1.6%
In November: -0.4%
YTD: +6.3%

Oil futures: $85.31
Gold futures: $1392.80
(new ‘immediate delivery’ high of $1424.60 on 9 November)
Euro/$ spot: 1.3103

ECONOMY & MONEY

• China's manufacturing growth accelerates, according to PMI
• Money market rate rises to two year high
• Yuan little changed on overheating concerns and Europe’s debt crisis; Forwards point to +1.9%
• Five year bonds sold at 3.64%

EQUITIES

• Stocks rise on economy's resilience
• Nomura says China may ease policy as inflation cools
• Morgan Stanley targets a 19% rise in emerging market shares next year; but is worried about inflation
• Global stocks to rise 15% next year, says RCM Asset Management; likes China in 2011

KOREA

• China blocks UN security council action against North Korea
• Chinese State Councillor to visit North Korea today

DOMESTIC

• Acer says China will be the World's largest computer market within three years

HONG KONG

• China to increase the number of companies involved in cross border Yuan trade settlement, says HKMA
• China’s Yuan bond sale in Hong Kong is 10 times over-subscribed
• Sandy Hendry Shui On Land aims to sell PRC homes in Hong Kong buyers
• Hong Kong retail sales rise 21.6%