Not noon (yet)

“Good news always sleep ‘till noon”, says the peerless Michael Timmins and if you live in Tripoli or Christchurch that is certainly true (and then some). Respectively, what is happening in Libya and environs is quite extraordinary: people power and history in the making, fuelled by cyber-space. The World will never be the same again and tyrants everywhere beware! Meantime, in New Zealand (the Nation of my birth), there has been more literal seismic activity with a 6.2 tremblor on Tuesday, which reportedly lasted a rare, but interminable, 60 seconds. The devastation is as extraordinary as the events in the Middle East and North Africa and the loss of life (113 and counting) similarly astonishing for a country with a population of only 4.5 million. Like the World, NZ may never be the same again but there is an indefatigability of spirit amongst Kiwis articulated by the dictum “she’ll be right”; which is much more profound than it may first appear.

Unsurprisingly, too, there has been a dearth of news outside the Mediterranean and Southern Pacific, with China being no exception; and my blogging fingers have been veritably twitching. For the record, though, the Shanghai Composite - after a bright start on Monday - then fell each day until today which means the first weekly deficit (-0.7%) since w/e 21 January. It could have been worse, though, and in Hong Kong it was - with a 2.5% fall in the week (despite a sterling effort on Friday).

That said, those nice (and very bright) people at CICC noted that the Shanghai Composite is up 2.5% in the year-to-date. They also say that stocks may extend these gains as money supply growth approaches a level which will force the Government to ease its “tightening campaign”. M1 growth, which averaged 17% for the past 16 years, has rebounded each time it neared 10% - such as in 1998, 2002, 2005 and 2008, says CICC. The rate slowed to 13.6% last month, compared with a 15 year high of 39% in January 2010. “Whenever M1 growth approached 10%, money supply growth started to rebound, and together with it the A and H shares in Shanghai and Hong Kong”. This week, too, both the seven day repurchase rate (down 29 basis points to 3.11%) and interest rate swaps eased as international turmoil sped up.

Elsewhere, both CICC (again) and Shenyin Wanguo Securities said that February’s inflation rate could ease back 0.1% to 4.8%. This may not sound that great, but previously CICC was forecasting 5.6%.

More broadly, the Nation is to spend $228 billion on airports and aviation infrastructure through 2015, says the Civil Aviation Administration of China; which is a lot of money, even for China.

In real estate, the Government has underlined its commitment, this week, to build a mass of new social housing and to expand the public rentals sector. It will also provide tax cuts and finance to help. Some commentators took this as bearish news for developers, and their sub-Index within the Shanghai Composite is down 3.2% since 21 February (at 3397.12). However, China Vanke, the Nation’s number one, says it is confident that its sales will stay above Yuan 100 billion ($15.2 billion) for a second year. It breached this remarkable level last year having set itself 2014 as the target year to do so. But there was also a barb in the tail, when it added that “it will also depend on Government policies”.

Similarly in Hong Kong, as part of this week’s budget, the Government has said that it will increase auctions of land and build more apartments to avert a real estate bubble. Elsewhere, house prices in Macau and Taiwan continue to race ahead by 15 to 20%, although Taiwan is now seeking to curb investor speculation by taxing them 15% if they sell a unit within a year of purchase.

Even more fundamental, the putative “Jasmine Revolution” continues to ripple through a minority of folks in China, with a web-based call for anti-Government rallies every Sunday at 14.00 in 13 major conurbations. “Jasmine Z” and his or her “Jasmine Voice” cyber discussion group has also emerged this week, although the platform - LinkedIn - has now been blocked. No coincidence then that, this week, too, President Hu made a speech extolling the virtues of socialism with Chinese characteristics. His new five year plan will also be promulgated in a few days from now after the National Peoples’ Congress which starts on 5 March. No pressure.

“Never get out of bed before noon” - Charles Bukowski

Shanghai Composite:
Today: -0.04% to 2,878.57 at close
This week: -0.7%
Since 5 July: +21.8%
Since 8 Nov: -7.2%
YTD: +2.5%

Hang Seng:
Today: +1.82% to 23,012.32 at close
This week: -2.5%
Since 25 May: +21.2%
Since 8 Nov: -7.8%
YTD: -0.1%

Oil futures: $97.97
Gold futures: $1404.80
(new ‘immediate delivery’ high of $1431.25 on 7 December)
Euro/$ spot: 1.3791


EQUITIES
• Weekly equity decline is first in more than a month; although CICC is positive
• Minsheng Bank to seek $4.6 billion from a share and bond sale, it is reported

MONEY
• Repo rate and swaps ease on international political instability; bond yields rise
• February’s inflation may ease 0.1% to 4.8%, say CICC and Shenyin
• Ministry of Finance 30 year bonds at 4.31%
• CBRC asks banks which have lent to local governments to recalculate their capital levels by 31 March

ECONOMY
• Chinese consumer confidence slides on inflation
• China may invest $228 billion in aviation through 2015
• Volvo/Geely is reported to have selected Chengdu as the site for it first Chinese factory
• Rolls-Royce aims to boost car sales at least 10% in 2011 on the back of Chinese demand

REAL ESTATE
• Government will financially assist new social house-building and public sector rentals
• China Vanke is “confident” that its sales will stay above Yuan 100 billion for a second year
• Five Beijing banks end mortgage discounts

DOMESTIC
• China’s ‘Jasmine’ rally organiser calls for weekly gatherings via the web
• LinkedIn is blocked in China after “Jasmine” pro-democracy postings and commentary
• PBOC to make Yuan 10 Billion loans to aid drought regions
• China’s progress shows “superiority” of system, says Politburo

INTERNATIONAL
• Kazakhstan embraces Chinese investment
• China’s investment in Africa is to increase to $50 billion by 2015, says Standard Bank

HONG KONG, MACAU & TAIWAN
• Tsang says Hong Kong's main task is “fighting inflation”
• Hong Kong to boost land auctions and build apartments to avert a bubble, says Tsang
• Macau home prices may gain up to 20% in 2011 on growth in the casino trade (which dwarfs las Vegas)
• Taiwan may impose 15% tax on investors who re-sell houses within a year

IRON & STEEL
• Iron ore prices in China fall as buyers utilise stock piles, says Deutsche Bank
• China plans to increase iron ore investments abroad to where they meet 40% of imports in five years, says CISA
• CISA says China should better mange it iron ore stocks and steel manufacturing capacity; as finished product prices dip
• Demand to ship iron ore will rise 6% in 2011, says Clarkson
• Vale’s Q4 net profit rose almost four-fold on iron ore prices: volumes rose 17%, while prices averaged $121 per ton, which is an increase of 216%
• Vale plans to out spend rivals this year with a $24 billion budget
• Vale to spend more than $1 billion building Guinea railroad to access iron ore
• Taiwan’s China Steel sees Q4 net income collapse 71% on increased raw material cost; and now raises prices for second time this year
• Afripalm signs a deal to build a South African steel mill