Jan. 21, 2010 (Chinavestor) China surprised the world again - this time with a 10.7% GDP growth in the fourth quarter of 2009, +0.2% above consensus estimates. Stocks in Shanghai reacted positively for the news with financial institutions taking the lead on Thursday. The irony is that there is nobody out there who'd know for sure which sectors are gong to benefit the most - so banks outperformed. Conventional wisdom prefers financial stocks assuming they'll growth with the overall economy regardless of sector rotation. Looking at the best thirteen stocks of the SSE-50 Index on Thursday, the largest 50 companies of Shanghai Composite Index, nine are banks, three are insurance companies and one is a railway.
|Name (Ticker)||Change %|
|1||S/Pudong Development Bank (SHA:600000)||+3.4|
|2||Huaxia Bank Co (SHA:600015)||+2.9|
|3||Daqin Railway Co (SHA:601006)||+2.8|
|4||Bank of Communications (SHA:601328)||+2.3|
|5||China Construction Bank (SHA:601939)||+2.3|
|6||China Life Insurance (SHA:601628)||+2.2|
|7||Industrial Bank (SHA:601166)||+2.0|
|8||Ping An Insurance (SHA:60318)||+2.0|
|9||China Merchants Bank (SHA:600036)||+1.8|
|10||Industrial and Commercial Bank of China (SHA:601398)||+1.8|
|11||China Citic Bank (SHA:601998)||+1.8|
|12||China Mingseng Bank (SHA:600016)||+1.7|
|13||China Pacific Insurance (SHA:601601)||+1.6|
So what does this mean for American investors?
January 12, 2010 (Erwan Mahe - OTCex Group)
It is with unmitigated pleasure that I observed this morning the gelling of a phenomenon relating to Chinese monetary policy which we have been following closely for some time now.
According to Mundell's incompatibility triangle, the following three phenomena cannot coexist in a country:
fixed currency (yuan's peg to the dollar) autonomous monetary policy (which is the difficulty for China) free flow of capital.
In an effort to maintain relative monetary policy independence, while pegging its currency to the dollar, China has long been trying to regulate capital flows (outflows), thus, trying to fight against a natural movement for a country with a chronic current accounts surplus.
Nov. 20, 2009 (Erwan Mahe) Of course, everyone thinks they know, since the three officials in question, Mr Trichet (ECB Chairman), Mr Almunia (European Commission on Economic Affaires) and Mr Juncker (President of the European Council of Finance Ministers), have expressed their views on the matter many times in the past few weeks.
The eurozone must contend with the Beggar Thy Neighbour policies of its main trading partners, United States, the United Kingdom and China, which have their own processes distinct to their countries.
And I am leaving aside for the moment the 15% to 20% depreciation in the currencies of peripheral European countries since March.
Nov. 2, 2009 (Erwan Mahe) In a modern economy, credit availability, both in terms of quantity and costs, is a major component in any analysis of future growth potential.
The death of securitisation had earlier choked off the credit flow to the real economy, since it deprived banks of their ability to easily refinance loans by packaging them as bonds, which ended up being sold to investors throughout the world. These packages involved loans to consumers (Credit Card, Mortgages, Student Loans), to businesses (CMBS) and to LBO funds (CLO).
With investors having deserted these products a long time ago, given a lack of confidence in what they viewed as overly complacent (to put it mildly) rating agencies, all these credits remain in bank balance sheets at a time when they are trying to improve their capital ratios, thus, pushing them to either launch a succession of capital increases or to reduce outstanding loan volumes.