Archive for category China
The Trends And Shape Of The World’s Economic And Financial Markets in 2013…Part 3 –10 biggest events and industry trends
Posted by jeffreyyap in China, Economics, Equity Market, Fixed Income Market, Global, Hong Kong, Money, Strategy, United States, Words of Wisdom, World on January 8, 2013
This is the 3rd and final part of my overview of the trends and shape of this year’s global economy and financial markets. The 10 biggest investment trends that are likely to be feature and standout in 2013 are as follows:
1. China will become more global and powerful than before
2. The world would start to re-focus on emerging markets but frontier markets will be the most talk about
3. In 2012 it all about global government debt and currency but in 2013 country, sector and company picks would be back in vogue
4. Equities will see more inflows than bonds in the 2nd half of 2013
5. Commodities prices will rise, talk of global inflation will be back and so will the speculation of end of quantitative easing
6. Geo-political risk will pick up led by domestic dissatisfaction with income gap and low growth
7. The talk of hard landing in China and fallout of Europe fails to happen
8. Investors and corporates start to gear-up again
9. Technological advancement will be key driver of productivity instead of cost management
10. The new era of tech bubble will start to build as cheap money chase innovations/dreams and hopes
Before i moved into the long waited sectoral views for those that miss the Part 1 and 2 earlier on you can review it with the links below
Given what has been said thus far, we are in a new era of which Mohamed El-Erian says a new normal. In his context he refers to the global economy from financial and political perspective. I look at it more from a microscopic level, what would it mean to our day-to-day life and it is the day-to-day activities of the seven billion people in the world which will shape the world’s economy.
Some of you have probably read this week, many countries in the world faced one of the worst winter in many decades and as i said in part 1 of this analysis extreme weather is something we should all start to get use to. As a result of extreme weathers, urbanisation will speed up even more and as a result create more demand for urban homes. What would be implications? This would leave fewer people farming for crops for example.In a similar deduction, cities with moderate weather such as Hong Kong, Sydney, and Singapore will attract more affluent professionals and businessmen to house their families.
The industrial sectors which will see most technological advancement this year would be robotics, green energy and online commercialisation. There are many successful stories in 2012 on retail automations. This was helped partly by the growth in smart phone usage and mobile technology. I am sure many of us have noticed the use of Iphone in order taking in restaurants, Ipad usage for browsing of products in shops etc. The year of 2013 is the year of robotics with rising cost of labour and shrinking pool of cheap labour. Robotics is the way forward to maintain or increase productivity globally. On green energy, given the extreme weather and governments pressure to contain inflation and pollution with rising population green energy has to be the sector of focus for most large nations. Cost of production came down substantilly in recent years and the commercial viability is slowly becoming reality. Online commercialisation is another key theme this year. In 2013 we will see more people purchasing songs (not CDs) tv series (not DVDs) clothing (not shops), services (not in person). Have you used online personal trainers and dieticians? Is it coming our way big time. Consider this; will you learn to play golf from Tiger Woods and soccer from Lionel Messi online if they were available? Answer would be yes no matter how impersonal it may be. This wall of awkwardness is coming down EVERYWHERE.
Sectors which i like in terms of investment this year are as follows:
1. Retail Sector – Companies with mega brands with huge brand value as Porter’s five forces are less prominent these days. Companies using technology to reach global consumers with rising income in an aging population. Look at most of the countries where there is aging population which sector continue to flourish? Retail!
2. Green energy - solar, wind and water will prove to be winning sectors with potential rising crude oil price and technological advancement and governments backing globally to support this sector in 2013
3. Property - I am not a big fan of developers. Nevertheless, given the whole world is getting more centralized than before – seen the rise in density in global cities lately?? I like companies with good portfolio of investment properties as consumption growth and rising replacement cost would make these companies attractive. Look for those with huge landbank and solid properties in prime location
4. Healthcare – In here i am talking about pharmaceutical industry which produces drugs, vaccines, supplements for this growing aging global population. I am talking about companies that make technological breakthrough in terms of medical machinery Have you seen doctors and nurses in hospitals holding the latest IPhone and Samsung Galaxy but hospitals still running on old medical equipments?
5. Banks – As the number of players shrunk the survivors post Lehman with global franchise will do good in this less borderless world. I am talking about those facilitating cross border financing and investment business not propriety trading here..
6. Services - Education, Social Network, Nursing and Retirement homes are some of the services which will see an increase in importance. Everyone would want their child to go Harvard, MT, Oxford or Cambridge. Everyone would want feel connected through Facebook, Twitter or LinkedIn. Everyone would hope their retirement home is like staying in Fourseasons or Mandarin. If anyone can achieve that kind of stigma or following the world its their oyster.
The Trends And Shape Of The World’s Economic And Financial Markets in 2013…Part 2
Posted by jeffreyyap in China, Economics, Equity Market, Fixed Income Market, Global, Hong Kong, Money, Strategy on January 3, 2013
The financials market got off to a great start in 2013 as expected. Please refer the articles i have written in the past 3 months calling for this
Risk Asset Cooled ahead of Hurricane Sandy? Opportunity to buy for 2013!
China PMI rose above 50 – signs of sustained recovery to come?
Divergence In China Related Equities Recently – How To Read Into It?
The financial markets are likely to see a very strong year as equity risk premium for major economies such as EU, Japan, China, Hong Kong, South Korea are all over 10%. The fall in risk free rate plus the major compression of credit spread in 2012 has made equity markets one of the cheapest asset class out there. The other 2 asset class which could also perform well would be convertible bonds and high yield bonds as global default rate continue to fall on the back of quantitative easing.
Furthermore, in 2013 we are likely to see a repeat of 2003 and 1993 of which in 2003 the money that came out of the Nasdaq bubble fueled global risk assets including US subprime and asset backed markets which burst in 2007 . In 1993, the money that came out of post Japan bubble also fueled the markets in Asia ex Japan which resulted in the 1997 Asian Financial Crisis later on. I believe we are seeing a repeat here as globally central banks has embarked on massive quantitative easing and this year onwards the money is going to flow out of government bonds and money market funds to fueled risk assets especially those markets trading above historical risk premiums.
Stay tune for Part 3 of this article – as I analyze sectoral performance globally.
The Trends And Shape Of The World’s Economic And Financial Markets in 2013…Part 1
Posted by jeffreyyap in China, Economics, Equity Market, Fixed Income Market, Global, Money, Strategy, United States, Words of Wisdom on January 1, 2013
2012 marked a year of uncertainty from a global political and economic perspective led by China’s leadership changes, US and Japan Elections, US fiscal cliff, EU sovereign debt crisis and fear of China’s economic slowdown. Notwithstanding as well the Mayan’s end of the world prediction. In 2013 we will face a year with more normality than 2012. But how will the world look like?
Few things for sure, population will continue to grow led by the South Asia and the Sub Africa region while the mortality level continue to rise with growing aging population in the developed nations. Technological advancement will continue to drive our daily lives in 2013 with the advancement in mobile technology; more people will make internet part of their lives in areas such as social networking and online shopping. Income disparity will widen further unless we have a re-socialisation of current capitalism society (don’t see this happening just yet). Weather will get more extremes than ever and food prices will continue to rise with urbanisation and growing population. Water and arable land which have been basic necessities in the olden age of mankind will become more scare.
In terms of political situations, global governments are likely to work closer against the “new” common enemy of the internet. The threat of internet will tip preference towards social benefits against corporate capitalism. You will see more corporate backlash on top of the recent financials institutions bashing. Tensions among super power nations and regions will ease as they face more pressure internally and over the web over the issues which rose to prominence in the last decade.
Moving over to financial markets, on the back of the key developments highlighted above, key financial trends for the next few years would start to emerge in 2013. For details of my forecasts and predictions of key financial markets for 2013, please lookout for the second part of this 3 parts series.
2 months ago I made this call on Chinese Equity Markets and Currency – Equity markets defied the fall last night to rally to new highs this month…What about other indicators?
Posted by jeffreyyap in China, Economics, Equity Market, Fixed Income Market, Money, Offshore RMB, Strategy on December 25, 2012
2 months ago I made this call on Chinese Equity Markets and Currency. Since then the benchmark indices have rallied more than 10% to recoup all losses this year while the currency has hit a new 19 year high against USD
How Much Will Chinese Yuan Appreciate Against USD in 2013?
Posted by jeffreyyap in China, Economics, Fixed Income Market, Global, Money, Offshore RMB on December 22, 2012
How Much Will Chinese Yuan Appreciate Against USD in 2013?
Poll Result! How Much Will Chinese Yuan Appreciate Against USD in 2013
Dear readers, It seems that Linkedin members are expecting a much stronger RMB against USD in 2013 compare to most economist and media. The strength of currency in most cases are determined by people who believes in it and if this sample is representative of people’s expectation of the Chinese currency, we are in for another strong year ahead. Please not among the sample, non Asians are the most bullish surprise again!
Rising Debt Offering Guaranteed By Asian Banks – The Latest, China Cosco Debt Offering
Posted by jeffreyyap in China, Economics, Fixed Income Market, Money, Offshore RMB on December 1, 2012
Debt offerings by weak/low credit standing companies guaranteed by Asian Banks have started to picked up recently. For example Doosan’s debt guaranteed by Korea Development Bank, China Cement debt guaranteed by DBS Bank and the latest the debt offering by China Cosco guaranteed by Bank of China.
Please click on the link below for full report by Bloomberg.
“If Cosco was on a standalone credit they would probably struggle to raise any money from the market,” Jeffrey Yap, the Hong Kong-based head of Asia fixed-income trading at Mizuho Securities Asia Ltd. said in a telephone interview yesterday
Still, the banks are taking on off-balance sheet risk by guaranteeing the debt, which could create problems if more lower-quality companies’ bonds are protected, according to Mizuho’s Yap. That could lead to a number of claims on the bank for funds, he said.
“The authorities need to watch out if the banks are putting on a lot of risky credit onto the book by guaranteeing the credit of those companies,” he said. “If we start seeing smallish companies, or even property companies, getting bank guarantees that’s what we need to watch out for.”
Divergence In China Related Equities Recently – How To Read Into It?
Posted by jeffreyyap in China, Economics, Equity Market, Hong Kong, Money, Strategy on November 27, 2012
Domestic Chinese A-shares fell to 4-year low today, however many Chinese equities or China related equities listed overseas are rising in value. This include H-shares in Hong Kong as well as China related shares in US, Japan, Hong Kong and Singapore. How do we read into it? In my recent conversations with onshore and offshore investors, there seems to be a reverse in terms of their outlook this time around. Domestic investors are less convince on the performance of the equity market going forward due to the fact for the pass 4 years China has registered above 30% in accumulated growth and property prices have doubled but we have seen flat performance in its equity markets. Foreign investors on the other hand are beginning to turn bullish on Chinese equities and its currency on the back of cheaper valuation on a global comparison. It is therefore a very smart move by investors to purchase Chinese companies and China related companies listed overseas. By the act itself, investors are buying cheap call option on the performance of Chinese equities and currency in the medium term.
The Final Frontier: Renminbi Hedging And Africa
Posted by jeffreyyap in China, Fixed Income Market, Money, Offshore RMB, Strategy on November 20, 2012
RMB has great opportunities for much bigger role in the trade flow between Africa and Greater China region. Please see my comments in Asia Risk
“Despite this uptick in interest in renminbi, trade and investment in Africa is still dominated by the US dollar: much of the Africa-China trade is resource based and therefore traded in the greenback. And despite the apparent existence of exotic currency crosses such as between the Zambian kwacha and RMB most are structured with the dollar as a go-between currency, according to Jeffrey Yap, managing director of fixed income trading Asia at Mizuho Securities”
For Full article please click
http://www.risk.net/asia-risk/feature/2225814/the-final-frontier-renminbi-hedging-and-africa
Hong Kong’s Latest Economic Indicators – What Does It Tell Us? – Part 2
Posted by jeffreyyap in China, Equity Market, Fixed Income Market, Hong Kong, Money, Offshore RMB, Strategy, Words of Wisdom on November 18, 2012
The current disparities between growth (+1.3%), deposit rates (zero!), inflation (5%) and property prices (20%) in Hong Kong its like watching a race between a hamster, tortoise, horse and cheetah! As mentioned in part 1 of this topic, the reason why there is inflation and upward pressure in monetary value of certain services and assets in Hong Kong is largely due to the demand from external factors. Similar to my analogy of Hong Kong resembling a shopping mall, most of the key products and services are targeted at serving/providing to foreigners (in a good way) The 3 key areas of growth for Hong Kong in this decade comes from the financial, property and luxury consumer sector which is largely targeted at foreigners (foreigner buying up luxury apartments, foreign companies raising IPO, foreign tourist buying up luxury products etc.)
Ok then you must be thinking what is different this time compare to 10 years ago? It is the HKD peg. Chinese Yuan and other Asian currencies have appreciated over 20% against HKD in the past 5 years and this trend is likely to continue with the quantitative easing in the west. The HKMA and Financial Secretary have denied the peg has brought about inflation? Look at 10 years Hong Kong Government Bond Yields 0.46%?! This is largely due to inflow of money and the result of increase in monetary base from defending the peg. 10 yrs yield at 0.46 while inflation is 10x of that??
Why are they in denial?They are just afraid to say it because given how well the peg has served Hong Kong, no one is going to change the peg, be it someone in HKMA, government or even the PBOC and the Chinese Government. One must also know this the HKD peg served as a good indicator for China on liquidity flow so why remove that….But something has to be done if we were to see a fairer race among the people in Hong Kong than the one we currently have. The peg can stay but for the sake of Hong Kong people who is reading, you should take your money out of the bank and move it into RMB, buy some equities or fixed income investments and last YOU mustn’t sell your property. If you don’t own a property in Hong Kong means you are short and the peg will kill you…If one decide not to do anything of such, they better make sure he/she gets a work in this mall or else you would be poorer even though the country continues to prosper….
Hong Kong’s Latest Economic Indicators – What Does It Tell Us? – Part 1
Posted by jeffreyyap in China, Hong Kong, Money, Strategy, Words of Wisdom on November 17, 2012
Hong Kong announced on Friday its Gross Domestic Product grew 1.3% year-on-year in the third quarter, similar to the 1.2% growth seen in the second quarter. The data also unveiled the underlying consumer price inflation stands at 4% in the third quarter. Residential Flat prices from June to September rose by over 6% (in just 3 months!).
These data must look rather bizarre for general public as well as economists and financial professionals. Here is another observation, China Daily reported this “Hong Kong‘s Causeway Bay has dethroned New York‘s Fifth Avenue as the world‘s most expensive retail area, as luxury brands retailers such as Burberry, Salvatore Ferragamo and Gucci compete for limited prime space in the city to court big spenders, particularly mainland tourists.
The average annual rent at Causeway Bay, the prime retail district on Hong Kong Island, surged 34.9 percent to $2,630 per square foot at the end of June from a year ago, beating the $2,500 price tag of Fifth Avenue in New York‘s Manhattan district, which has occupied the top spot for 11 consecutive years, according to estimates by commercial real estate consultant Cushman & Wakefield Inc.”
So why is this happening? This is because the economy has become more dependent on China and Global Spending (just imagine Hong Kong as a large Shopping Mall) hence even though growth been rather weak, inflation continue to rise especially in areas which supply goods and services to this large global shopping mall. In this shopping mall, you have bankers that provide credits, salesperson to serve customers, lawyers to document/advise the process and doctors to cure those that gotten sick while shopping,
This is the state of the Hong Kong’s economy. It is debateable whether it is good or bad but one thing is for such we need a good mall management team (the government!) to guide the people of Hong Kong to equip themselves to work in this mall. No shopping mall survive without makeover and enhancement and quality control. It is time for the government to start working on these or else it would turn into an unloved mall with little patrons just like those malls in Hong Kong which none of us patronise anymore…
PBOC Zhou And Commerce Minister Chen Absence From The China’s Central Committee List – What Would Be The Implications?
Posted by jeffreyyap in China, Fixed Income Market, Money, Offshore RMB, Strategy on November 14, 2012
Interesting day with China political party announcing the new list of 205 members today on China state television after the party’s 18th Congress in Beijing, where a once-a-decade leadership change is taking place. The most relevant changes were PBOC Zhou and Commerce Minister Chen was absence from the central committee list which means Zhou will retire from PBOC and Chen from his post as Minister of Commerce. This is inline with what I have heard from onshore sources months back on the dissatisfaction of the recent policies adopted by the Ministry of Commerce and PBOC especially in preferring a weaker currency while draining liquidity from the system via RRR hikes. CNH and CNY appreciated to a 19th years high for the 5th day in a roll on the back of stronger official fixing today. With the absence of these old guards, we can expect further strengthening of the currency against global majors in the effort of promoting domestic demand and increase per capita income. We look forward to the new leaders to promote consumer and domestic credit growth which means further credit easing and capital market formation is likely. The offshore RMB market would be one major beneficiaries of this as well. Stay tune for further updates…
Signs Of Demand Coming Back to China?
Posted by jeffreyyap in China, Hong Kong, Money, Strategy on November 10, 2012
Yesterday as I walked around Central, Hong Kong i got a sense that retail purchases by Chinese shoppers have started to picked up. There were various groups of tourist with bags full of luxury items purchased from shops such as Burberry, Prada, Chanel etc. This was not the case for the past six months. I gathered in recent months from friends and colleagues who have travelled globally for work, holiday and honeymoon! the sense is Chinese shoppers are travelling further away from China to shop. That would mean less shoppers are likely to flock to Hong Kong for their shopping spree. However, given my observation yesterday, I believe the Chinese demand has started to picked up in Mainland China, abroad as well as Hong Kong.
China To Speed Up Interest Rate Liberalization – Why Is It Needed And What Would Be The Impact?
Posted by jeffreyyap in China, Equity Market, Fixed Income Market, Money, Offshore RMB, Strategy on November 8, 2012
China plans to move toward full liberalization of interest rates, but hasn’t outlined a specific timetable for the reform. PBOC’s Zhou echoed the Chinese leader’s wish during the first day of the 18th National Congress of the Communist Party of China (CPC) which would last for a week. In President Hu’s speech, he emphasis on market developments, increasing domestic demand and improving people of China’s wellbeing by targeting a doubling of per capita income by 2020. I have no doubt the doubling of per capita income would be achievable but the quality of the income may vary significantly. I support PBOC Zhou’s push for interest rate liberalization because this step is needed to ensure a proper formation of the second phase of China’s monetary system to ensure capital are allocated efficiently to the hands of people and companies that produces the most economic and social benefits to the people of China. Even though I am not from China (but ethnic Chinese by birth!), I would be ecstatic to see this happening. Could you imagine the multiplier effect on mankind would be with 1.3bil people having the ability to contribute effectively to the world or at least able to improve the quality of their own lives? However, what would be the impact of such liberalization? It would mean further opening up of the banking and capital markets to global institutions, doing business based on market clearing levels and allow capital to flow to the highest risk adjusted return investments. However, Chinese financial institutions would need to innovate fast and moving up the knowledge chain at lightning speed to assist and be part of such liberalization. I witnessed the road to 1997 Asian Financial Crisis and my advise to Chinese leaders today is to ensure great governance over such liberalization. Liberalization is good if not great but only if it is done properly.
China Construction Bank to issue offshore RMB bonds in London – view my interview 6 months ago
Posted by jeffreyyap in China, Fixed Income Market, Offshore RMB on November 4, 2012
Leader Change Cuts Dim Sum Sales to Five-Month Low: China Credit
Posted by jeffreyyap in China, Fixed Income Market, Offshore RMB on November 3, 2012
Leader Change Cuts Dim Sum Sales to Five-Month Low: China Credit
China’s once-a-decade leadership change has cut Dim Sum debt
issuance to a five-month low, as uncertainty about the new
regime’s monetary policy counters the cheapest borrowing
costs since April.
Sales of yuan-denominated bonds in Hong Kong slumped 38
percent from September to 4.14 billion yuan ($664 million), the
least since May, according to data compiled by Bloomberg.
Average yields fell to 4.76 percent last week, down 13 basis
points in October and the lowest in six months, according to
Bank of America Merrill Lynch indexes. Companies globally pay an
average 2.66 percent to sell dollar debt, the indexes show.
As Communist Party cadres meet from Nov. 8 to appoint
China’s next generation of leaders, issuers are pausing to
evaluate the new leadership’s monetary policy after two interest
rate cuts earlier this year. Premier Wen Jiabao said last month
the economy will keep showing “positive changes” after growing
2.2 percent in the third quarter from the previous period, the
most in a year. His likely successor Li Keqiang has yet to
signal his policy bias.
“Issuers will likely wait for everything to settle down
after the leadership transition before looking at debt sales,”
according to Paula Chan, managing director in the fixed-income
team at Manulife Asset Management in Hong Kong. “The market
seems to be pricing in no cuts to interest rates or the reserve-
requirement ratio but that’s to be affirmed.”
Monetary Policy
Top-rated companies paid an average 14 basis points less on
three-year debt in June on the day after the central bank
announced the first interest-rate reduction in more than three
years, according to Chinabond indexes. That was the biggest-
daily slide in six months, the indexes show.
The People’s Bank of China sliced rates to 6 percent in July, and
the central bank will likely hold at that level for the rest of the year,
according to the median of 25 estimates in a Bloomberg News
survey. In September, economists had forecast a 25 basis-point
reduction by Dec. 31.
“If you cut interest rates in China, offshore yields will be very
favorable for investors but it will discourage potential issuers,” said
Frances Cheung, a Hong Kong-based senior strategist for Asia at
Credit Agricole CIB. “For the general economy, cuts onshore would
be a symbolic move. It could boost confidence.”
Dollar Debt
Some issuers have chosen to sell dollar-denominated bonds
rather than Dim Sum notes given the falling cost of funding in
the U.S. currency, according to Jeffrey Yap, the Hong Kong-based
head of Asia fixed-income trading at Mizuho Securities Asia Ltd.
Citic Pacific Ltd. and Franshion Properties China Ltd. led
$2.43 billion of dollar bond sales by Chinese companies in
October, up from $800 million a month earlier, according to
Bloomberg-compiled data. Soho China Ltd. also plans to sell
dollar debt, a person familiar with the matter said yesterday,
asking not to be identified because the details aren’t set. The
yield premium that investors demand to buy Chinese corporate
bonds denominated in dollars rather than Treasuries fell to 376
basis points on Oct. 18, the lowest since January 2011.
“The primary reason we’ve seen relatively less Dim Sum
issuance last month is simply that dollar funding costs are
lower at the moment and companies can typically issue more and
with longer tenors in the dollar market,” according to Bryan
Collins, a Hong Kong-based fixed income portfolio at FIL Ltd.,
known as Fidelity Worldwide Investment.
The size of individual Dim Sum notes averaged 671 million
yuan this year compared with an average $927 million for Chinese
corporates’ dollar debt sales, data compiled by Bloomberg show.
The average maturity of Dim Sum bonds is 2.21 years, compared
with 6.42 years for Asian dollar debt, according to Bank of
America Merrill Lynch indexes.
Yuan Strength
The U.S. Federal Reserve, European Central Bank and Bank of
Japan have all announced bond-buying programs, prompting global
investors to plow more money into higher-yielding assets as more
cash was made available in the financial system. Emerging-market
bond funds attracted more than $1 billion for the week ending
Oct. 24, with two-times more capital flowing into funds in major
global currencies rather than local ones, according to data
provider EPFR Global.
The yuan climbed for a third straight month in October. The
currency rose 0.05 percent to close at 6.2372 per dollar in
Shanghai yesterday, extending its rally in the month to 0.76
percent, according to the China Foreign Exchange Trade System.
“The renminbi is now facing two-way fluctuations,” Credit
Agricole’s Cheung said. “Lately the currency has appreciated
again but I think the expectation is for it to be relatively
stable and if there’s any appreciation that will be very gradual.”
Guangdong Nuclear
The cost of insuring Chinese sovereign bonds against
default using five-year credit-default swaps fell two basis
points to 71 basis points on Oct. 30, according to data provider
CMA, which is owned by McGraw-Hill Cos. and compiles prices
quoted by dealers in the privately negotiated market. Credit-
default swaps pay the buyer face value in exchange for the
underlying securities or the cash equivalent if a government or
company fails to adhere to its debt agreements.
Yields on China’s benchmark 10-year government bond were
little changed at 3.59 percent yesterday. Companies pay an
average 4.81 percent to sell Dim Sum bonds as of Oct. 29, 44
basis points less than at the beginning of the year, according
to Bank of America Merrill Lynch indexes. That compares with an
average yield of 4.44 percent on three-year debt sold by China’s
top-rated corporates, down 45 basis points in 2012, according to
Chinabond indexes.
China Guangdong Nuclear Power Holding Corp. led Dim Sum
sales last month, raising 1.5 billion yuan from three-year notes
that priced to yield 3.75 percent, according to data compiled by
Bloomberg. The power generator was one of four companies that
Chinese regulators approved to issue offshore yuan bonds earlier
this year. China Minmetals Corp., also one of the authorized
issuers, has yet to sell any of the debt.
“Given the leadership change things are slow,” said
Mizuho’s Yap. “But it still makes sense for Chinese issuers to
sell Dim Sum bonds.”
By Rachel Evans
China PMI rose above 50 – signs of sustained recovery to come?
Posted by jeffreyyap in China, Equity Market, Fixed Income Market, Strategy on November 1, 2012
China PMI rose as expected. This did not come as a surprise as indicators such as retail spending, freight volume, overtime etc has been on the rise recently. What is extremely encouraging was the reading was strong despite the general slowness in October with long holidays and leadership transition in the horizon. I am certain further picked up in economic activities and growth in months and quarters are very likely and the recovery seems broad-based too. Some critics who are unfamiliar with the developments in China might point to the lacklustre lending numbers but if one was to add the growth in debt issuance (which are typically long-term financing) the total pick up in financing activities have actually picked up in pace and in strength. I would suggest readers to position for beaten down sectors (credit and equity included) to have a good rally in the next 3 months. In debt, Chinese Property, Auto Sector, Cement, Retail while in equity, Property, Auto, Retail, Construction, Healthcare, Logistics, Brokerage would be my obvious sectors picks.
10 days to new leadership in China, Nov 8 2012
Posted by jeffreyyap in China on October 30, 2012
3 weeks to new leadership in China, Nov 8 2012 is the day!
PBOC’s Record Reverse Repo Operation – what does it mean?
Posted by jeffreyyap in China, Fixed Income Market, Offshore RMB, Strategy on October 30, 2012
PBOC injected 395billion yuan today the highest number on record. 7-day repo rate plunges 123bps to 3.09% the largest drop since Jan 19. I believe many economist that called for RRR cut has been disappointed this year as PBOC and Chinese Government wants to control excess lending in unproductive economy and the move to inject liquidity instead of RRR cut is a sign that the authorities will start to move to boos the economy through other methods. I would expect tax cuts etc to come soon…
Risk Asset Cooled ahead of Hurricane Sandy? Opportunity to buy for 2013!
Posted by jeffreyyap in China, Equity Market, Fixed Income Market, Strategy on October 29, 2012
Running up to the US election and Chinese leadership change and now Hurricane Sandy, risk assets have pulled back last few days. I believe this week would be the best time to add risk assets to your portolio if you have miss the boat earlier. Global inflation have started to pick up and fund flows have move out of money market funds in search of yields and returns as US and China economic data points to further recovery. Right now many global investors has parked cash in low yielding fixed income instruments such as government bonds. Once global economy picks up slighlty and QE being withdrew from the system money will chase for higher return assets and given low valuation in the equity and credit space, we will see a long and sustain run up in the Risk assets in 2013.
