2015-05-31

New Home Prices Rise Nationally In May

The CREIS May report for 100 cities is out and it shows prices rising 0.45% nationally. Gainers and losers were almost even: 48 cities saw gains, 52 saw losses. Bifurcation continues: the ten largest cities saw new home prices increase 0.99%.

Source: 2015年5月中国房地产指数系统百城价格指数报告

Regulators Already Losing Control As Policy Easing Sparks Speculative Fever in Housing; Retail Investors Anxious After 528 Crash

Shenzhen is on the far left.

In China, Shenzhen real estate is rebounding from long slump
A rainstorm that flooded roads in Shenzhen last Saturday did not stop some 4,000 people from lining up in front of the sales office of a residential community in Longhua District that had just started taking orders.

The buyers snapped up more than 700 apartments — the most expensive ones cost more than 40,000 yuan ($6,500) per square meter — in less than two hours, the developer said.

A similar scene occurred at six other developments that also opened for business over the weekend, underscoring the strength of the rebound seen in the southern city’s housing market since the central government relaxed property-related policies in September and again in March.

In recent months, the prices for new apartments in Longhua District — near Hong Kong and home to many IT companies — have soared from around 28,000 yuan to about 40,000 yuan per square meter, analysts familiar with the Shenzhen market said.

The market for second-hand apartments has also recovered.
The headline of this article in iFeng describes a situation where buyers bought 1,600 apartments in 4 hours for a total of 8 billion yuan.

iFeng: 楼市上演“抢房大战” 1600套房4小时抢光

This has led regulators to announce buying restrictions will remain in effect and these sell-out situations will be strictly investigated.

iFeng: 深圳楼市疯狂引官方发话:继续限购 严查"日光盘"
And as for the talk in recent days about the "out of control" Shenzhen property market, Shenzhen official said these were not objective, the official said to the excessive growth of house prices should not be exaggerated, it should be rational and proper guidance to buyers. In addition, Shenzhen will launch a series of measures to ensure the healthy and orderly development of the property market, including speeding up the sale of commodity housing approvals, accelerate new residential land supply. Fake "one day sell-outs" and other artifically exacerbated tight supply and demand "cover plate reluctant sellers" and other illegal activities, will be strictly investigated and dealt with according to law.

In the stock market, the regulators are silent as investor anxiety soars: 证监会对暴跌沉默意味深长 股民周末心发慌

"Thursday's crash, from the daily limit to the lower limit; rebounded on Friday, and from limit to limit, such heartbeatin stock market, how to play next week, how should I do??" After Thursday's terror after the collapse, and Friday no rebound, just received a puzzling the "doji" and SFC afternoon press conference, did not have any say on the stock market slump, which makes many investors expect policy to save the city more flustered.

Although 5000 is not a bull market top is industry consensus, but we are also cautious on the stock market next week that 5000 will be around for some time to adjust up and down or fluctuated.

...After the crash, most of the new investors suddenly gone spectrum, many investors are concerned about a regular meeting on Friday, regulators will not be so, for A shares what kind of argument or position as before. However, the Commission conference on Friday, the management did not issue any sound on the stock market plummeted.

Many investors worry 5.30 massacre reproduce, in fact 5.30 Incident Management is a sudden increase in the results of the stamp duty; and the recent market crash, is to adjust to market demand more spontaneous. "Since they do not want regulator comments to lead to a collapse, do not expect regulators to say anything to save the market." Guangzhou Securities in a market source said, management wants the stock market to go "Manniu" way, as long as the stock market does not appear irrational continuous spike , regulators "invisible hand" will not appear, this is the stock market a sign of maturity.

Aunty Zhao, who had experience in the 2007 crash, cut her positions in half.
The old shareholders Zhao aunt experienced in the 2007 bull market slump. "Slump 5.30 is very horror, many stocks plunged 40% in a short time." Last week coincides with the eighth anniversary of the massacre 5.30, as investors worried about the policy side appears heavy bearish again.

Zhao aunt told reporters that not only is she a lot of experienced last round of the long bear market of 5000 in the vicinity of the old shareholders have to lighten up plans. She also made full preparations, after a sharp correction on the stock market if touched 5000 points, then halve the warehouse is undoubtedly the best choice to reduce the loss. If singing all the way to seven or eight thousand points, and even break a million points, the remaining half position can guarantee themselves a share in a bull market.
Other investors are all in:
Reporters learned that many new investors are approaching 5000 points chase at the high bid, the result is "set" to live. Chen told reporters that the new investors, last week saw the market impact of 5000 points, he is extremely excited to buy what stock analysts friends advice, a friend suggested that he was not chasing the high, be careful near the 5000 shock, but he did not hold back, High chase into a small board stocks. When a friend asked him to dare to bargain-hunting after the crash, he only reluctantly said: "I have been chasing the high, all in."

The Economic Observer also looks at the stock market in “530”魔咒之后,成长股继续“牛”?
A shares do not believe in Murphy's Law

If you are worried about something happening, then it is more likely to occur, which is a classic description of the fourth article of Murphy's Law.

A share of the market has once again proven the existence of Murphy's Law. However, it seems not at all.

From entering since May, the market has experienced a few days after the opening of a new round sideways style sharp short squeeze - price, K line graph upside trend is exactly the same and the great bull market in 2007, at the 18th to the 27th, to achieve the "Eighth Yang" of the market will push the index to 4941.71 points.

However, the rapid climb in the index during those few days, the last round of experienced investors began to worry CBBC conversion occurs when the cliff is not the type to fall "530" price.

In this backdrop, May 28, 5000 stock index mark in one go after failing to turn upside down, again and again 4900,4800,4700 break point three integer mark, and eventually huge decline of 6.5% to close, resulting in two City, more than 500 stocks hit bottom, over 2000 stocks pan-green "grand."

On that day, except under "530 Quotes" Fear in the background, the national team "Huijin" holdings of the four lines, profit-taking, brokers tighten financing and IPO soon lever multiple factors such as the market is also thought to cause big day an important reason for fall. "530 Quotes" The reason why people fear, in addition to the Ministry of Finance midnight stamp duty to raise significant policy bearish stock market brings, but also because "530" style cliff fall is the end of the bull market preview. In this round of market, the "528" crash appears therefore cause for concern.

Eight years of a reincarnation. "528" after the crash, is not it will continue the trend of "530" after the? Or yet, this bull market will be any different? After "530", A shares where to go?

A discussion of various brokerage and investment bank outlooks follows:
After the "528" of adjustment, market focus extends bull next step to become a topic of concern investors most.

Southern Fund believes that despite some adjustments in the profit-taking pressure, but adjust the depth is limited, the same medium-term bull market, this view has been recognized by most analysts profession.

Founder Securities chief strategist 郭艳红 for Economic Observer said that after the implementation of the New Deal, Jiangsu Province, the local government debt, to generate a reference to other provinces, after the local debt default risk is reduced, the safety factor of the stock market can be improved; the same time, the management of the continued to accelerate reform of propulsion for the economic transformation provides a good expectation in the market continue to loose liquidity environment, which may be more long-term bull market.

But, as in the first half as the sustained and rapid rise in A-cap stocks, perhaps hard to see in the second half, a private person, said Beijing, a new feature of this bull market is constantly leveraged funds into the market, the market share of leveraged funds The rise is a direct result of the market volatility zoom, and even a market correction could lead to great fluctuations in the disk management precisely for this reason, the ongoing control lever, when the lever is controlled in a certain range. " fast ox "may turn regulators hope" Manniu. "

Currently, in terms of margin financing various indicators continued to climb, as of May 28, two financial balance once again set to reach 208 million yuan, of which, financing the balance has steadily maintained at 2 trillion or more, reaching 207 million yuan. At the same time, the ratio of the two financial transactions in shares traded in the A has maintained a high proportion of margin according to Company data show that as of the end of April, two financial transactions accounted for 17.1% compared to A-share trading.

Even in the May 28, the broader market plunged 6.5%, the funds financing the purchase amount is also once again hit a record high, reaching a high level of 2,691.39 billion yuan, buy only the amount of turnover accounted for 11.40 percent of the day. After Based on this, the purpose of the regulation of securities firms began to risk, in early May, 1352, China Merchants Securities lowered the discount rate securities, Hai Tong Securities May 26 Kusakabe issued a notice to all credit customer financing (vouchers) margin percentage increase of 5 percentage points again . On the same day, GF Securities also announced that in order to control the risk of margin trading business, from May 26 onwards, the financing margin ratio margin trading on the underlying securities from 0.7 to 0.75.

Meanwhile, with the regulators on OTC with a capital "forbidden umbrella", clean up after docking HOMS brokerage and other movements, off with the capital by a certain degree of containment, with Chinese companies and P2P platform is overall contraction direct docking with the capital broker business.

Based on these actions, the above-mentioned private placement to judge the second half of leveraged capital inflows may slow down the speed, enthusiasm after trading stabilized in the second half of the investment style will change accordingly.

On the theme, Minsheng Securities and Founder Securities are focused to the SOE reform. Minsheng Securities believes that the bull's largest regional theme - owned enterprise reform, real good yet fully Priced-In, has a real future potential of the pillar industries has not yet been fully excavated, the rise of direct financing market is still halfway through the second half with two intensive policy focus on catalysis 2025 is the Chinese main large manufacturing and state-owned enterprises. Founder Securities also believes in the second half, promoting SOE reform and perhaps even faster than we expected, after the formation of the top-level design, 1 + N SOE reform policy to accelerate the floor, around the local policies will be introduced intensive, including the reform of central enterprises, ESOP and the establishment of asset management platform, will bring good investment opportunities in the second half.

However, investment style, due to the different emphases of brokerage, distinct differences appeared in the restructuring of short-term strategy in the second half.

Among them, Huatai Securities and Gao Yi assets and other agencies believe that a clear opportunity in the second half of the industry structure and broad demand for space-financial assets. Huatai Securities analyst Luo Yi that the recent inventory shot regulators leverage, although good liquidity in financial stocks may be subject to the impact of the first round, but regulators are focusing on inventory objects are 1: 3 or more highly leveraged illegal market funds, and small, high interest rates do not meet the regulatory standards of these accounts financing, financing channels corresponding to these companies is much higher valuations, purely storytelling company. So, after this round of adjustment, the financial sector will have a very significant excess returns in the second half, the proposed allocation of financial stocks.

Guoxin Securities and Guotai Junan view the opposite happens. Guoxin Securities A shares from 5.30 after the departure angle fix proposed Hengqiang effect that when the resource class and now GEM can be compared, it is recommended after the crash should continue to focus on growth stocks configuration represents the new economy.

Guotai Junan Securities chief strategist Joe never hold "do not have a fear of heights, continue to favor growth" view that the "increase in risk appetite is the fundamental driving force of the bull market in 2015", "Before the macroeconomic environment has fundamentally changed the market in the short term does not style change will occur "in the third quarter suggest that investors still continue to configure the growth of the company and restructuring the company along traditional policy direction.

Investment sector, "may wish to focus industrial upgrading, such as 2025 in China, including robotics, high-end CNC machine tools; focus on emerging consumer formats, such as new energy vehicles, intelligent logistics, intelligent home, electricity providers, industrial parks and venture capital; Internet transformation traditional industries, such as agriculture, medicine and other. "Li Shaojun said.

H / A Share Discount For 2015-06-01


After 70 Years, Who Owns Your House?

Good news Chinese homebuyers: you do! But you might have to buy the land again, or the government might decide to take your house. While you will get compensation if the government takes your land, the downside is that in a city such as Beijing, I doubt they'll fully compensate you such that you'll be able to move next door. More likely, you'll be forced out of your neighborhood and have to move outside the city. So enjoy the centrally located home while you can, or find a place with politically connected neighbors.

The land countdown begins from why the developer buys the land.

Land rights range from 40 to 70 years based on the type of property. The house is always yours, but the land underneath has a time limit.

Born Again First Time Homebuyers in Beijing

If you sell your house in Beijing, you will qualify as a first time homebuyer and be able to tap public housing funds again. Also, the previous rule was 90 sqm and below require a minimum 20% down payment; above is a 30% minimum. Now all homes will have the lower 20% standard.

iFeng: 北京公积金新政 卖掉名下房再购仍算首套

2015-05-29

ChiNext Versus Nasdaq

The last close of the ChiNext and the 2000 peak in the Nasdaq are lined up.

Maybe The Federal Reserve Can Sell Hotels on Ebay?

Alibaba courts more China bad debt managers for online auctions
Huarong Asset Management Co Ltd is poised to become the second Chinese bad loan firm to auction soured loans online amid a push by the government to settle these debts as the economy slows, an executive at e-commerce giant Alibaba Group Holding Ltd said.

...At least 14 financial institutions, including China Merchants Bank Co, China Minsheng Banking Corp and Tianjin Financial Assets Exchange use Taobao to sell cars, real estate, wineries, factories, corporate shareholding, and land, the website shows.

Courts and local authorities are also using the platform to sell assets: this month, the Shaanxi provincial government sold 171 cars confiscated in a nationwide corruption crackdown for just under 9 million yuan. The sale attracted nearly 7,000 bids.

Earlier this month, Taobao also put up for auction a 16-century Italian castle and 103 apartments in Milan as part of a joint-effort between Alibaba and the Italian government.

Oil Glut In Rail Data

A 7 Point Comparison of 528 to 530, Or Why 528 Isn't Like 530, So BTFD


iFeng: 全面剖析6.5%:5·28不是5·30 7大异同点预判后期走势

The 7 point comparison of May 30, 2007 6.5% one day drop to May 28, 2015 6.5% one day drop. In some cases I've pulled a Google Translate or summarized it.

1.
The volume in 530 was very high and represented a high rate of volume. The volume on 528 was high, but not excessive. There were 500 stocks limit down on 528, 18% of the total. On 530, 800 stocks were limit down, 60% of listed shares at the time.
This point makes me think the market could slide for longer this time.

2.
In 2007, January 4 to May 29, the stock index rose 62.02%, in 2015, January 4 to May 27, the main stock index rose 52.77%...in 2007 the trend is even more crazy.
This is correct, but they should have gone back to July instead of January. On 530, the market was trading 400% above July 2006 levels. On 528, the market was only up about 125%.

3.
Regulation is much lighter this time. On May 11 and May 23, 2007, the government twice issued warnings of "caveat emptor" to market participants. When the message wasn't heeded, the stamp duty was raised.
This ties in to number 2, the government isn't as concerned here and is more worried about managing a long-term bull market than it is concerned a major top could be unfolding.

4.
Valuation: as of yesterday's close, the Shenzhen market has an overall average price-earnings ratio of 60.59. The Shenzhen main board P/E is 37.38, small cap P/E is 75.21, the GEM P/E reached 129.86; the entire Shanghai stock market average price-earnings ratio is only 21.97. On 520, the Shanghai stock market average price-earnings ratio was more than 40; Shenzhen average price-earnings ratio was about 60, at the peak of 6124 points, the Shanghai stock market average price-earnings ratio rose to 69, then CITIC Securities had a P/E of 48, HaiTong Securities had a P/E of 39.34.
The lower P/E is in large part due to low bank valuations. Large blue chips have generally not been the center of speculation to this point.

5.
In 2007, the stamp tax was raised from 1% to 3%. On 528, the main news was Huijin selling bank shares, but this is a small amount.
This explains the 520 crash much better than the 528 crash, if you don't think both cases are mainly a result of psychology to begin with.

6.
Guangzhou Great Power Energy &Technology (300438) was limit up and limit down on Thursday, a swing of 20%, and there were many small companies with 20% moves. 520 saw similar volatility in small caps.

7.
This market is leverage fueled. The 2007 market was fueled by new investors coming into the market. Investors put about 100 billion yuan of new money into the market during the run-up to 530. Investors have run margin debt to over 2 trillion yuan in this bull market. Risk is greater in 2015.
The current market is much riskier than the 2007 market in terms of volatility, due to the high level of margin debt.

Article conclusion: BTFD.

Law of history show: rebound is a high probability event

2015-05-28

China's First Tier Goes International

This article originally posted in Shenzhen Daily closes by saying that aside from a real estate tax, first-tier prices will not decline because (in not as many words), China's first-tier cities are becoming international cities. International capital is also returning because fears of depreciation are lifting and interest in China is picking up.

iFeng: 一线城市房价正接轨国际大都市 后续还会涨?
The day before yesterday the news: the economic situation in the first quarter CBRC internal meeting, has allowed banks to real estate development loans the appropriate extension. Although this is an update, but it seems to say it is actually already happened at least two months things. This month, the real estate situation has undergone profound changes.

I must say that this is not an isolated event, but the management of the debt crisis in the part of the systematic approach, others such as the replacement of local government debt, banks are not allowed to vote under construction in the city was evacuated platform project loans, etc., are In order to prevent a debt is debt chain Mars ignite the fuse, the powder keg which set off the entire debt. This is why the debt chain broke open house on foot quotient crash reports, the recent relatively rare, much less the beginning of less intensive - Oh, dun Daoxialiuren ah!

On the real estate industry itself, at least the kind of debt liquidation auction because the supply of housing to bring focus, and thus bring a chain reaction of panic clear inventory at fire-sale blocked. This is also the product of a unique system with Chinese characteristics, if it is pure market behavior, which would have triggered a chain reaction. Of course, as the Federal Reserve to buy bonds does not mean that the debt will disappear like debt rollover does not mean that the debt settlement, which means it is only a temporary bandage to stop bleeding, to prevent further deterioration of the wound to be able to grow new flesh on the old record come.

It should be said, the effect is obvious. Rates tier cities, especially Shenzhen, the local housing prices jumped the most recent, is illustrative. Not much to say, record a recent report:. "New Deal enacted from 3.30 less than two months, a number of hot spots in Shenzhen, such as the former sea, Longhua, Bao middle area jumped, housing prices soared nearly 40%" stocks had super power, the yuan abnormal strong, continued easing of the real estate policy, the downward trend in interest rates, which all work together to change the real estate one-sided pessimism, so that the population inflow especially in first-tier cities housing prices reverse. All this interaction, in turn, changed the international hot money is expected, they again do more to China.

Cited two cases, one is Shangzheng Bao reported that foreign office market to return to first-tier cities, optimistic about its potential for appreciation, recently Shanghai office project triggered a bidding offshore funds, including Blackstone have famous; the other is the British Financial Times Yesterday's report, including Goldman Sachs, Citigroup, Credit Suisse this international investment bank, recently a profit hypertrophy business is financing for the Asian tycoon, "so that it can invest in China's stock market soared." back to China International Capital profit, We observe the current real estate market is an important prerequisite background.

In the case of expectations for a large depreciation in the Chinese yuan reversing, international capital is once again positive on China, China's real estate market is expected to get back on track. Notice, in April of real estate investment growth was a mere 0.5%, which in any case, it is difficult to say it is normal. At present, China's real estate, it may have been saturated in the aggregate, but in the structure, there is a huge gap, because a considerable number of our house, is covered in the population is out of the western town. We had hoped to build a house as attractive, but the logic is wrong, man has always been to build a house, people where to go, where demand for real estate will appear.

In this sense, the first-tier cities and major cities in the national strategic layout, such as the joint development of Beijing, Tianjin, the Yangtze River economic belt along the way as well as the construction of an important node in the city's housing prices are expected to stabilize, rebound, to resume its rally. No matter how unhappy readers and friends, I have to tell you a fact of life: housing prices in first-tier cities are on the way with the international standards of metropolitan housing prices, but also in the visible future, both inside and outside the city line Rate this time in the final practice before, unless the introduction of real estate tax, otherwise it will be impossible to see the possibility of major setbacks and callbacks tier cities housing prices.

H / A Share Discount List for 2015-05-29

A share losses outstripped losses in Hong Kong, narrowing the valuation gap on Thursday.

Margin Call Clips A Shares, But Absolutely Not Insider Trading

Barron's: China Stock Meltdown and Inside Information
Some investors apparently had inside information about China’s brokerage firms preparing to clamp down on margin accounts. That crackdown was credited with helping torpedo Chinese stocks Thursday.

These investors pre-positioned for Shanghai’s stock market to decline by buying bearish put options on a major U.S. exchange-traded fund that tracks China’s stock market.

They are now counting their profits with glee. Some of the put options bought Wednesday have today nearly doubled. The investors profited by knowing that efforts to limit margin lending — investors borrow money from brokerage firms to buy stocks — would dramatically disrupt China’s stock market.
This isn't insider trading, for the same reason there isn't insider trading in currency markets: there are too many factors in play.

China markets plunge in record turnover as margin traders take fright
On Thursday morning at least three Chinese brokerages, including Guosen Securities Co (002736.SZ), Southwest Securities Co (600369.SS) and Changjiang Securities Co (000783.SZ) said they would tighten margin requirements.

"The brokerages are front running what the regulator wants to do," said Bernard Aw, an analyst at ING Markets in Singapore.

Haitong Securities (600837.SS) and GF Securities (000776.SZ) had made similar moves earlier in the week.

"This is no longer an individual case, but an industry-wide campaign," said Zhang Chen, analyst at Shanghai-based hedge fund Hongyi Investment. "Clearly, they got guidance from regulators, and this shows a change of government's attitude toward the margin trading business."

Here why it's not insider trading at all in this case. The change at GF and Haitong was announced on Tuesday morning Eastern USA time: 海通和广发证券上调两融业务融资保证金比例. The time stamp on the story is 2015-05-26 22:11:00.

Chinese Netizens React to Market Drop

This comes from friends on WeChat. Chinese reactions to the drop in stocks. Some people are levered up, so the 6.5% drop led to some hefty losses.
【不服不行】8年前惨剧今日重演!朋友圈一片哀嚎,天台站满人!

First the comparison to May 30, 2007:

This led to contemplating a jump:

Followed by: Don't jump! Wait for the rebound!
Don't fear, it's only a technical adjustment!

May Crash Fear Returns After Thursday Drop Matches 530 Plunge; Baofeng Avoids Limit Down Loss

I had a feeling the A-share market had to be peaking, at least in the short-run, when people who don't know the difference between an A-share, an H-share and a time share started asking me if ASHR was a good buy.

Coverage of the market's 6.5% plunge on Thursday included this nugget:
History is always surprisingly similar, on May 30, the stock index also plunged 6.5%.
iFeng: 沪指暴跌6.5%祭奠530 五百股跌停

I posted on this at the start of May: Will Chinese Stocks Crash in May?

A 6.5% drop on May 30, 2007 was the first move of a 5-day sell-off that shaved 23% off the index.

Recently, there's evidence that QFII's are again lightening up on Chinese shares, selling down positions as the price rapidly increases. This has at least one person drawing a parallel to the past. In terms of psychology, it is an apt comparison. The Chinese stock market is driven by emotion and psychology, and at some point there will be a terrific correction that will have some explanation, but will mainly be a psychological reaction. This bull market has yet to see a significant correction and the current percentage gains from the ongoing rally have exceeded the gains from 2006-2007. A correction of more than 20 percent is possible.
Looking ahead, if there is a 20% correction here, then the next parallel that will be brought up is the October 2007 market top.

And in case you're wondering about Baofeng, there were more than 500 stocks limit down on Thursday, but Baofeng wasn't one of them. It fell 9.41%.

People's Daily Asks Official 5 Questions on Economy, 8 Signals On Current Policy

UPDATE: The English version of the People's Daily article is now available. Five most pressing questions on the Chinese economy — Exclusive Interview with an ‘Authoritative Insider’

Original post from May 26 follows:

Liu Shan explains the 8 signals on the front page of the People's Daily. The article (linked at bottom) appeared on May 25, and was in the format of an interview, with 5 questions put to an unnamed government official.

第74期:人民日报头版头条释放八大信号

Chinese Real Estate P/Es Home Price to Income Ratios

35 cities the average price earnings ratio of 8.7, has 14 cities the price earnings ratio is higher than the average. Two typical cities, Hangzhou property market in 2014 was significantly cool, reasonable price earnings ratio tends to be. And Xiamen prices rose, the price earnings ratio grew too fast, healthy development of the property market negatively.

Sub-regional perspective, the eastern cities continuation of last year's ranking, and a wide gap. Surprisingly, Shenzhen and Beijing ranked first again, the price earnings ratio as high as 20.2; second-tier cities in eastern price earnings ratio climbed 0.4 from last year, the average is 9.2; the middle-tier cities increased income housing 60%; second-tier cities in the west continued the downward trend. But excluding marketable type of affordable housing, in 2014 the 35 large and medium cities had an average price earnings ratio of 10.6, which Shenzhen, Beijing, Shanghai, Fuzhou, Xiamen, five cities ahead, Shenzhen up 21.7, surpassing Beijing ranks first. Overall, the price earnings ratio ranking, mostly east of the city.
Data was based on new home prices though.

From my own estimate of local prices and rents, P/Es of 50 to 100 are not uncommon in Beijing, which is why equities were so much more attractive in recent years.

iFeng: 内地35城市房价收入比出炉:深圳超北京居第一(名单)

Shanghai Cuts Time to Residency From 7 to 2 Years

People living in Shanghai can qualify for residency in as little as 2 years under new rules being drafted. Though many will still need to wait 3 or 5 years, that's down from the previous 7 years. Also, instead of relying on job skills and money, the new requirements will focus on entrepreneurship.

Residency reform is being formulated across China, 16 provinces have already announced new policies:
According BEIJING reporter to incomplete statistics, the country has Xinjiang, Heilongjiang, Henan, Hebei, Sichuan, Shandong, Anhui, Guizhou, Shanxi, Shaanxi, Jiangxi, Hunan, Jilin, Fujian, Guangxi, Qinghai, officially announced the 16 provinces Opinions reform the household registration system in the region.

iFeng: 居住证改革缩短落户年限 房价或将产生波动

2015-05-27

Yuan Exceeds 20 Yen For First Time

At some point, even Chinese nationalists can't ignore a sale.
iFeng: 日元4年贬值40%:兑人民币跌破0.05 兑美元创8年新低

FIFA Donated To Clinton Foundation

ZH: The Farce Is Complete: FIFA, Qatar Donated To The Clinton Foundation
Earlier today, when commenting on the latest global criminal scandal, that of "rampant corruption" at FIFA, we - jokingly - said: "And now we just sit back and wait to see how many of the defendants sent "donations" to the Clinton Foundation and how many speeches Hillary and/or Bill gave at the Baur au Lac in the past two decades."

Then we decided to make sure the joke wouldn't be on us and that FIFA hadn't indeed donated to the Clinton foundation.

The joke was on us... because not only did FIFA donate to the Clinton Foundation...

... but so did the Qatar 2022 Supreme Committee, responsible for organizing and winning the 2022 World Cup, a world cup hosting which was also contested by the United States:

H / A Share Discount List For 2015-05-28


China Further Breaks Oil Monopoly: Shandong Dongming Granted Import License

Flashback to August 2014: China Begins Breaking the Oil Monopoly
China's Guanghui Energy has received a crude oil import licence from the government, becoming the first non state-owned enterprise to be granted the sought after licence as Beijing gradually loosens its grip on the oil market.

Now what was the largest teapot refinery as of 2012, Shandong Dongming, has won an import license: 能源垄断松动:山东地炼首获进口原油使用权

Bloomberg in February 2015: China ‘Teapot’ Refineries May Access Imported Oil Under New Rule
China will allow more oil refiners to process imported crude, opening the door for small, independent plants known as teapots to use an alternative feedstock.

Refiners investing in overseas oil exploration or capable of advanced processing and pollution-treatment technology will have priority to use imported crude, the National Development and Reform Commission said in a Feb. 9 statement released on its website on Monday. To be eligible, plants must also have at least one crude distillation unit with a designed capacity of more than 2 million metric tons a year, it said.

The Barrel: Should China’s state-owned giants fear the teapot refineries?
China’s intention to relax hitherto strict crude import rules may be causing alarm within its state-owned refiners.

The country’s small but resilient independent teapot refiners have long complained that restrictions on crude import rights have forced them to rely on alternative feedstocks — primarily imported straight-run fuel oil — and, as a result, hampered their margins and crimped processing volumes.

So the announcement of guidelines for new crude oil import quotes last month by the National Development and Reform Commission was received favorably by the refiners.

Will the ability to officially import crude revive teapot refiners’ fortunes?

Japan Will Drink All of East Asia's Seaweed Flavor Milkshakes

USDJPY 52-week high.

Where Have All The Equities Gone?

FTAlphaville: The mysterious decline in the number of US public companies
Had the relation between new lists and startups stayed the same after 1996, the U.S. would have had 9,000 more new lists in the post-peak period than it actually had. Thus, the decrease in listings in the post-peak period appears to be due to a lower propensity of firms to be listed rather than a decrease in the number of firms available to be listed.
Regulations aren't the answer:
It is often argued that the regulatory and legal changes in the early 2000s, including Regulation Fair Disclosure (“Reg FD”) and the Sarbanes-Oxley Act (“SOX”), made it more expensive for small firms to be listed relative to large firms so that these changes led to a drop in the number of listed firms, especially for small firms. The fact that the decrease in listed firms was well on its way before these changes took place implies that they alone cannot explain the listing gap.
The best explanation is that is it a bear market phenomena. It may also be a sign of significant economic and political change. Not a few people have charged that American democracy is slowly morphing into an aristocracy.

Falling CO2 Emissions Signal Weaker Chinese Growth

Balding's World: Why Greenpeace Leads Us to Believe Chinese GDP Growth is Low
Greenpeace has released a report (make sure to click through to the underlying links) suggesting that in the first quarter 2015, YOY CO2 emissions and coal consumption have fallen by 5% and 8% respectively. If true this staggering and incredibly important for our understanding of the Chinese economy. There is one important caveat. Greenpeace is utilizing Chinese government data, which as I just noted, is notoriously unreliable. As one article about the Greenpeace report notes, China has previously reported large drops in coal production only to later adjust the numbers back up enormously due to producers simply not reporting output.

While we need to proceed cautiously in interpreting these numbers, for the reasons noted, I believe we can make reasonable interpretations of this data.

... A plausible guestimate, based upon electricity growth between January to April 2015, would be GDP in the 1-3% range. There is simply no way you can have zero electricity growth and manage 7% GDP growth.
Add CO2 emissions to electricity, real estate investment, industrial production and trade figures all pointing to a serious slowdown.

2015-05-26

Playing Hot Potato With Chinese Steel

Western shift to protectionism threatens Aussie steel makers
A surge in trade protectionism in the US and Europe is threatening to push more steel into south-east Asia and depress profits for already stretched Australian producers.

Shares in BlueScope Steel have plunged 40 per cent this year in the face of weak steel prices, while Arrium is still trying to run its OneSteel business to conserve cash as the oversupply crimps margins.

Bank of America Merrill Lynch's global team of steel analysts warns that growing western hostility to foreign steel imports could put further pressure on already reduced steel margins in Asia.

"We believe the most negatively impacted region may be the rest of Asia [excluding China], which could feel the brunt of any redirected exports," BAML said in a research note.
China's steel puke is being focused into a smaller and more concentrated stream as nations move to block imports.

FT: Europe steps up fight over cheap steel imports
“China is caught with all this capacity, there’s always an incentive to keep on producing and offload the material rather than cut production and lose out to a competitor,” says Jeremy Platt, analyst at steel consultancy MEPS. “Because there’s so much excess capacity in China it’s going to take a long time to get to a normal level.”

The tariffs will probably lead to a further widening of the price difference between Chinese and European steel products. As China looks to export elsewhere, prices in those destinations will also fall.

This will mean that while Chinese imports to Europe may decline, steel from other countries could rise. When the US set anti-dumping duties on steel tubes from China in 2010, tube imports from Korea and Vietnam grew substantially “even though the latter hosted hardly any manufacturing capacity,” according to HSBC analyst Thorsten Zimmermann.

“Defending against global steel overcapacity is like a whack-a-mole game,” says Mr Rosenfeld. “You hammer it down in one place, and then it pops up in another. In one sense protectionist policy only serves to redirect steel imports from one region to another.”
Unless all the regions adopt protectionist policies.

China: TANSTAAFL

Forbes: China 'Debt Bomb' More Like A Bottle Rocket
McKinsey Global Institute says that from 2007 to 2014, China’s total debt, including debt of the financial sector, nearly quadrupled, to $28.2 trillion, or from 158% of GDP to 282%.
The most positive take is that China is a demographically aging country running up a pile of debt similar to the developed world, a uniquely large and centrally controlled economy that can deal with the debt. A crisis is avoided, but the debt load and demographic changes leads to sub-5% annualized GDP growth. Negative spin: every emerging market that saw a similar debt increase suffered a crisis.

Another new report, by economists at the Hong Kong Monetary Authority says the rise in indebtedness has been partly related to a big stimulus package launched in 2008 to 2009 following the U.S. mortgage debt bomb, a debt bomb that was noted by a few, like Addison Wiggins, and denied by most. There is no equal in China to the housing and derivatives bubble collapse in the U.S.. There’s no AIG with mortgage backed securities it bought on triple leverage. There’s no subprime mortgages in the market. Unlike the deficit-financed stimulus packages in the West, led by the Toxic Assets Relief Program in ’08, China’s trillion dollar stimulus package was funded mainly by state bank credit at the muni level. This was done largely to keep China’s full-employment policy in full effect.
There are a lot of subprime players such as the credit guarantee companies who guaranteed bank loans. (See: Credit Guarantee Firms Go Down Like Dominoes) They used AIG's business model and they are backing a lot of loans on the banks' balance sheets. Banks gave out loans to very bad credit risks because credit guarantee firms put their stamp of approval on them, but in many cases, the credit guarantee firm is one default away from bankruptcy.
The buildup state company debt has been policy driven leverage designed to keep Chinese people employed. These companies would have borrowed less if they were basing their decisions on the market. But, again, China is not a market economy. At least not fully. So the same rules of thought do not apply when analyzing this country from afar.
In a market economy, we could assume the debt was at least used efficiently, even if it was for unproductive consumption. Even though the market is being distorted, it is still responding to market signals. When interest rates are too low, capital flows away from the most efficient uses to the less efficient uses. Entrepreneurs and consumers behave as if there is more capital in the economy than exists. Projects that are unprofitable at higher rates of interest are started and consumers spend more than they otherwise would. When rates are normalized, the boom turns to bust and the economy finds it has even less capital because of the malinvestment during the boom years.

China is in worse shape than a market economy because the capital that it did allocate from 2009 to 2014 was often directed by local government officials who had the political power to directly intervene in the real estate market. The level of intervention taking place in sectors such as steel is off the charts in comparison to developed markets and China's only avoiding the full brunt because it is passing the cost onto foreign steelmakers, a solution that is about to end shortly.

Another article hits the same theme in Forbes: 10 Reasons Why China's High Debt Level May Not Be As Bad As It Appears

There are costs to central planning and intervention in the market economy. Those distortions grow over time and there is always a bill to be paid. All the Chinese government can do, to the extent it can control the economy, is decide where the pain is felt. Keeping in mind that as reform opens the capital account and the domestic economy, the government has less control than before. The question you need to answer isn't will China have a crisis, it is who gets the bill? Where does the distortion flow to next?

Beijing Housing Market Enters Summer

Good times are back for Beijing's housing market according to one article. Sales and price data support the view at this moment:
In the 4th week of May (5.18-5.24), Beijing new residential net sales hit 2120 units, down 4.93 percent week on week, an increase of 72.36% year on year; area of ​​216,400 square meters, down 11.42% wow, an increase of 59.59% yoy.
This chart shows weekly sales. On the left is week 21 from 2014, to the right are sales by week in 2015. Blue bars show number of homes sold, red line shows average price.

Same format, existing home sales:

Baofeng: The Pause That Refreshes?

H / A Share Discounts for 2015-05-27

The announcement of mutual fund money crossing borders on July 1 sent stocks up almost across the board, but the trend over the past few days has been towards a widening discount. Vanke is down from a 10% premium to a 6% premium in the past few days.

The Age of Land Finance Is Over

In the first quarter, land finance only made up 32% of government revenue (as Chinese media reports it), down from 60% in 2013. The 32% figure is equivalent to about 25% of total government revenues. This has serious implications for local government finances, since some local government debt is backed by land sale revenue and land sales fuel development projects. It also heightens the need to speed the development of the muni bond market.

Land sale revenue fell 38.2% in Q1, while land sales spending fell 22.3%. Local government revenues rose only 2.1%, with revenue growth weighed down by the drop in land sales. As one auditor put it, "Land is the chicken, revenues are teh egg, the share of land finance in local revenues will of course decline."

Over the past 10 years, land sales have been a major source of local government revenue. According to data released by the Ministry of Finance, land sales as a share of local government revenue peaked in 2013 at 59.8%, and in 2014 fell to 56.2%.

The latest Treasury data shows that in 2014 Jan-Apr, the state-owned land use right transfer income was 901.6 billion yuan, down 557.2 billion yuan or 38.2 percent.

In Q1 2015, land sale income was 690.5 billion yuan, a decrease of 36.1%; Q4 2014 saw a decline of 21.5% year on year.

...In the 20 provinces with data, there are 12 where land sales was more than 50% of fiscal revenue. Among them, Hainan and Jiangxi in 2014 saw land sales reach 75% of revenue, the largest proportion. Land sales in Tianjin, Anhui, Shandong, Jiangsu came to between 60 and 70% of fiscal revenues.

Among cities, according to the same research, financial dependence on the land in 2013 in Hangzhou, Foshan, Nanjing and Changsha, and other four cities of more than 100% higher dependence; Sanya, Hefei, Fuzhou, Kunming, Jinan, Xuzhou Ningbo, Wenzhou, Chengdu, also over 80%.
The land dependence ratio compares land sales to other revenue, not total revenue, so a ratio above 100% is more than 50% of total revenues. While that makes the numbers less shocking, in many cases the overall number is still significant enough to cause financial trouble for the local government:
If the land revenue decline causes local government revenue to decline, local governments that rely on land sales to repay debt will face enormous pressure.

Prior to the "China Economic Weekly" has reported that the data are available 23 provinces, land debt in the government is responsible for accounting for the debt repayment obligations, Zhejiang Province ranked first with 66.27%; ranked second in Tianjin, 64.56%. In other words, Zhejiang, Tianjin, the two governments bear the responsibility to repay the debt, the share of two-thirds of all have to rely on land sales to repay.
That report was covered here: Analysis of China's 23 Provinces Shows Housing Bubble Laden Provinces Are Most Reliant on Land Sales to Repay Debt; Zhejiang Tops the List

iFeng: 卖地时代结束:土地出让金一季度仅占地方财政收入32%

Wal-Mart + Alibaba = Nuclear Fusion

Wal-Mart to accept Alipay in a bid for growth in China
Wal-Mart Stores WMT -0.21% is teaming up with Alibaba BABA -0.65% to roll out the Alipay mobile payment service in China — its latest move to increase sales in a tough, but potentially lucrative international market.

Ant Financial, a financial affiliate of Alibaba, said on Wednesday that the partnership with the world’s biggest retailer would start with 25 stores in Shenzen, including one of its Sam’s Club locations, and be accepted at all 410 Wal-Mart stores in China by the end of the year.

The tie-up with China’s leading e-commerce company comes as Wal-Mart looks to dramatically improve its performance in the world’s most populous country. Last quarter, Wal-Mart’s net sales fell 0.7%, while comparable sales, which strip out the effect of newly opened or closed stores, were down 2.3%. Wal-Mart has grappled with the perception in China that its prices are not the lowest, among other challenges.

Yu Fenghui dubs the link-up "nuclear fusion:" 沃尔玛与支付宝要发生“核聚变”. He says this opens the door for Wal-Mart eventually using Alipay in all of its stores around the world and, if Apple Pay doesn't cooperate with Alipay in China, the Wal-Mart deal puts Alipay one step ahead of Apple.

First-Tier May Land Sales Hit New Low, Second-Tier Picks Up

If land sales don't pick up sharply in the last week, this will be the first month since 2014 that first-tier city land sales do not reach ¥10 billion in a single month. Currently, the four top cities have sold only 22 plots of land for ¥4 billion.

One factor is the supply of land: Shanghai has seen land sales by area fall for 12 consecutive months, but in April, prices were at their highest level since 2010.

Second-tier cities have seen land sales increase, with 81 plots sold in May for a premium of nearly 17%.

iFeng: 一线城市单月卖地不足百亿创新低 地价却在创新高

Another Default: Coke Bottle Maker

Bloomberg: Another Chinese Company Says It Will Miss Full Bond Payment
A bottle maker in China said it won’t be able to fully repay a bond due May 28, raising concern it will become the third company to default in the onshore note market this year as the economy slows.
Zhuhai Zhongfu Enterprise Co., which supplies bottles for Coca-Cola Co. and PepsiCo Inc. in China, can only repay 148 million yuan ($23.9 million) of the 590 million yuan principal, according to a statement to the Shenzhen Stock Exchange Monday. It plans to pay all the 31.152 million yuan of interest. The manufacturer, which isn’t state-owned, sold the 5.28 percent securities in 2012.

...Zhuhai Zhongfu’s orders have declined significantly since 2012 as its biggest clients increased their own production of bottles, according to a report from China International Capital Corp. on May 11. The company’s business with its three largest clients Coca-Cola, PepsiCo and Uni-President China Holdings Ltd. generated only 33 percent of revenue last year, down from 49 percent in 2011, according to CICC. Coca-Cola remains the manufacturer’s biggest customer, according to board secretary Han.

The shift comes as Coca-Cola and PepsiCo are increasingly focusing on cost-cutting to help support operating margins amid waning soft-drink demand, according to Bloomberg Intelligence.

Beijing Developers Plan To Raise Prices

"In the second half of the year, price increases in the Beijing market will be a bit clearer." A sales person in charge of pricing at a state-owned developer told "Securities Daily" reporters, "We are also working on a program of re-pricing and price increases."

It is worth mentioning that Tongzhou district is known as the Beijing property market "barometer", some of the developers have already decided to raise prices. And as a whole, according to Centaline statistics show that as of May 25, 2015, Beijing's Tongzhou District, this year has total turnover of 2878 sets of commercial housing, average turnover of 22,226 yuan / square meter, up 2.3% rate of increase, leading the city.
Although sales are picking up in the wake of government policy shifts, one reason for price hikes is rising land prices that add to the cost of housing.
From a regional perspective, old projects in Haidian District and Tongzhou District now entering the market have proposed price increases. Earlier, the head of marketing of a project told reporters bluntly, "any developer who doesn't raise prices is definitely not a good developer", as the Haidian District may have no new housing after three years.
Insiders also told reporters that they are not satisfied with projects at the current price of about 60,000 yuan / square meter. "After the end of May basically to price, price increase at least 1000-2000 yuan, raise prices a bit at a time." Head of pricing clearly expressed wishes to reporters.

iFeng: 北京开发商计划涨价 通州房价升至2.2万领涨

Narrowest House In Sydney Sells to Chinese National

Daily Telegraph: The narrowest house on the market in Sydney has sold for $965,000
When the hammer fell on $965,000, making the land worth more than $25,000 per square metre, agents, bidders and onlookers were all left in shock.

With an internal area of 48sq m and a land area of 38sq m, the two-storey Victorian terrace at 29 Terry St, Surry Hills, is roughly the same size as a one-bedroom unit.

Bought by an investor who was bidding over the phone from overseas, the 2.85m wide home now has a new owner.

The bidding opened at a modest $650,000 and quickly whizzed past the $700,000 price guide to land at the final result.


Real estate agent Raymond Hung was bidding on behalf of the successful buyer and said there was no doubt that the market was hot, however this didn’t deter his client.

“It’s not expensive,” Mr Hung said.

iFeng: 中国人百万澳元买悉尼最窄房 旁观者连连摇头

2015-05-25

Here Comes the Mutual Fund Money

Barron's: China Launches Another Connect, For Mutual Funds: Stocks To Benefit
An estimated 110 funds in Hong Kong are eligible, and in China, 1157 funds are allowed to participate in the new Connect, officially termed Mainland Hong Kong Mutual Recognition of Funds.

It is unlikely this mutual fund Connect will have a broad-based impact on market liquidity. Just like the stock connect, the initial flow is likely limited. Mutual funds need time to set up their distribution and marketing channels, and retail investors also need time to get educated on the new products, noted Goldman Sachs.
I expect brand names and discounted shares will be the most likely to benefit.

Minsheng Sees Potential Defaults in 2H

Minsheng lists these bonds as at risk in 2015, second on the list is the Ordos company, Huayuan, mentioned in Fallout From Ordos Implosion Continues

A Share Volume Exceeded ¥2 Trillion on Monday

iFeng: A股再度飙涨 两市成交金额突破两万亿

H / A Share Discount List for 2015-05-26


China Local Debt Risk Rising, Minsheng Estimates ¥2.3 Trillion Needed in 2015

Reuters: China's top banking regulator warns of rising bad loans, credit risk
China's top banking regulator warned of rising credit risk from real estate, local government debt and unconventional forms of finance, sources with direct knowledge told Reuters, highlighting Beijing's struggles to prevent risky debt from engulfing a stuttering economy.

The sources cited a speech given by Shang Fulin, chairman of the China Banking Regulatory Commission (CBRC), during a teleconference in early May.

The amount of non-performing loans in the first quarter has already reached 56 percent of the total amount last year, Shang said, according to the sources. Unconventional forms of credit - which usually refers to instruments like entrusted loans and letters of credit - were also on the rise, he said.

iFeng: 中国地方债规模超德国经济规模 央妈出手拯救
To clean up this mess local government debt, the Chinese government needs to cut borrowing costs. The central bank lent a helping hand. Since March 31, the three-month Shanghai Interbank Offered Rate (Shibor) has dropped 194 basis points, the largest two-month decline since 2008. In the meantime, the Chinese government launched a debt issuance and the place where the loan is replaced with low yield bonds.

April postpone local government debt issuance last week to start, Jiangsu and Xinjiang issued 3-year bonds with 3% yields, similar to national bond yields. In response, Citigroup analysts said, "some local governments may lose liquidity, all debt burden will be directed to the Central Government. As a result, local government bonds and government bonds is not much difference."

In the local government launched the size of more than 1.77 trillion yuan (four times 2014) bond issue, the Chinese central bank governor Zhou Xiaochuan has also accelerated the pace of monetary policy relaxation, less than six months, the central bank cut interest rates three times, twice RRR. Banks are the biggest buyers of government bonds, and as interest rates decline, their appetite for local debt will rise further. According to Mizuho Securities Asia estimated that the scale of Chinese local government debt may have reached 25 trillion yuan, bigger than the economies of scale in Germany.

Shanghai asset management center Yiu, Chief Operating Officer Rosanna said the central bank will do everything possible to ensure that local debt issuance costs in the low; if the cause interest rates to rise because of increased supply, so that the cost of borrowing is higher than ever before, and that the debt exchange, what Meaning? So interest rates upward is limited.
The article goes on to discuss the history of local debt:
According to the provisions of China's current "Budget Law", the local government in fact has no right to issue local bonds, and the law does not allow the existence of a deficit.

...the first stage is in the middle of 2009 - 2014, due to the national "4 trillion" investment policy to stimulate local financing platform in mid-2009 was a blowout-style development. In the original "Budget Law" framework enacted in 1994, local governments can not issue bonds directly, so in order to raise funds for infrastructure construction, local government financing platform to build thousands called project financing.

The second stage, after "2014 on the key tasks of deepening economic reform opinions" release, this announcement that China will establish muni bonds as the main local government debt financing mechanism, local governments can use the issuance of bonds to raise funds.

In fact, the latter concerns the second phase allows the state issued a series of policies to deal with local debt, thereby entering the third stage, the national implementation of local debt exchange, the local debt packaged into "new" bonds in the market.
There are many unresolved issues with the plan, such as, are local government's repaying old debt with new debt, or taking on new debt? Minsheng Bank recently estimated local governments may need to issue 2.3 trillion in municipal bonds in order to repay debt and fund new projects.

Shanghai Residents Out Earn Beijingers In Stock Market; Steel Demand Down; 99.5% of Stocks Rise

In the first four months of 2015, Shanghai residents saw their stock holdings increase by an average of 156,400 yuan versus 80,200 yuan for Beijing residents. Zhejiang, Guangdong and Jiangsu were next at
36,900 yuan, 29,000 yuan and 18,400 yuan, respectively.

QQ: 前四月上海人均炒股获利15万 北京股民人均赚8万
data show that the first four months of this year rose 99.5%, 98.9% of the stock outperformed bank deposit annualized rate of return.

Specifically, the 2547 stocks, rose over 100% of the 397 stocks, accounting for 16%; 80% increase over 685 stocks, accounting for 27%; 70% of the stock rose over 883, accounting There rose over 60% of 1163 shares, accounting for 56%;; more than 35 percent increase over 50% of the shares up to 1465, accounting for 58%.

With the vast majority of stocks rising, investors who buy stocks with eyes closed can make money.

Chinese Steel Demand Falling, Exports Rising, More Tariffs Coming

Steel demand is down. Xinhua: 国内钢市需求持续低迷 全球铁矿石价格再度掉头向下
...spot steel market is demand continues to slump, the decline in steel prices increase. Global iron ore market after a short-term rebound, prices once again turned down, tons of price back below $ 60.

According to the latest market report of the well-known steel information organizations "My iron and steel" to provide the domestic spot steel price index closed at 89.75 points, down 1.47 percent week. Steel City is currently characterized by downstream demand continues to slump, steel production has remained at a high level, more pessimistic outlook for the business, all of these "negative" factors make the spot steel prices decline increased. Even if the recent approval of the relevant state departments focused message railways and other investment projects, but limited short-term impact on the steel market.

According to the analysis, in the construction steel market, the price declines have intensified. Shanghai, Hangzhou and other places tonne price fell 10-220 yuan a week; wherein, Guangzhou, Chengdu and other places have fallen hundred dollars or more. The case with the "common" is: the market demand continues to slump, traders bearish sentiment increased, prices fell after another, the stock market decline slowly. Most businesses now is how to ship as soon as the primary consideration.

This probably doesn't help matters, at least until Indian infrastructure investment takes off: India outpaces China in steel production, up 6.7% this year

This definitely doesn't help: China's steel sector hit by new round of anti-dumping probes
China's steel producers are dealing with what the sector has described as a "Black May" after several countries followed Europe and launched or have decided to launch investigations into alleged dumping.

In mid-May, the European Union started an investigation into claims that China and Russia were selling cold-rolled flat steel for the manufacture of cars and home appliances at below market prices. The EU also decided to impose provisional anti-dumping tariffs on steel products from China, Russia, South Korea, Japan and the United States after considering a complaint lodged by European steel producers in June 2014.

Duties of 28.7% were imposed on China's Baosteel and Wuhan Iron and Steel Corp for their grain-oriented electrical steel, which is used mainly by power producers and distributors. Other countries such as Canada, Peru and Brazil also plan to launch or have launched similar investigations.

Mexican businesses meanwhile are calling for a government anti-dumping tariff on Chinese steel imports, while Turkey has hiked its tax on steel imports from China, which jumped nearly 300% during the first three months of the year.

This isn't going to help either: Chinese Steel Exports Rising

In previous years it has sought a more conciliatory position to complaints by trade partners, a WSJ article says in the past CISA, China’s steel trade association, has sought to persuade local steel mills to curb exports and show restraint but this year, in the face of an unprecedented surge in volumes, Ministry of Commerce spokesman Shen Danyang is quoted as taking a much more defensive line saying the rise in steel exports is due to higher global demand and is a result of Chinese steel products having strong “export competitiveness.”

...Meanwhile, the WSJ adds the US, Australia and South Korea have also signaled that they are lining up support for trade action against Chinese steel exports, which rose by 50.5% last year to a record 93.8 million metric tons and have continued at a high level this year.

Chinese steel mills are on a roll according to data reported by the WSJ. Between September last year and January this year, the volume of China’s outbound steel shipments each month shattered the preceding month’s record. While in the first four months of 2015, steel exports were 32.7% higher than a year earlier.

Spain Turns Right

Although Spain's left-wing parties advanced in the election this weekend, Podemos gained with a nationalist platform that puts leaving the euro on the table. Both it and the upstart right-wing party picked up seats at the expense of the two main right- and left-wing parties.

BBC: Spanish elections: Podemos and Ciudadanos make gains
With the count almost completed, the governing People's Party (PP) has won the most votes with 27%.

But it may have lost the Madrid city council for the first time in 20 years.
The Spanish economy has been a key concern for voters, and many are enraged over public spending cuts and reports of political corruption.

Prime Minister Mariano Rajoy's administration and the previous Socialist (PSOE) government are both seen as being to blame.

...the two traditional parties fell short of overall majorities in most areas. They both lost a significant number of votes to emerging groups Ciudadanos and Podemos.

In the capital Madrid, the PP won the municipal election but could still lose control of the city council. The ruling party took 21 seats but Ahora Madrid, backed by the leftist anti-corruption party Podemos, took 20. Ahora Madrid could now form a coalition with the Socialists who came third. Analysts say that similar deals could take place in a number of councils such as Valencia, further eroding the local power of the PP.

The ruling party may also need to make pacts of its own with the pro-business Cuidadanos party in places such as Murcia and La Rioja. Spain is unfamiliar with governing coalitions as the PP and the Socialists have dominated for decades.

Reuters: Spain's ruling PP gets worst local election result in 20 years

Beijing Housing Supply Declines

Inventory is still high in Beijing, buy new supply is falling. There were 20,238 new homes in the first 5 months of 2015, half last year's level. Through May 18, sales reached 23,674, up 31.6% from last year.

iFeng: 北京商品房供应创新低 供需失衡房价还要涨

2015-05-24

Tsinghua Forum Discusses China's Financial Future; Stock Connect Will End

Financial dos and don'ts under 'new normal'
China's heavy weights in the financial market are gathering at Beijing's Tsinghua university to discuss how the sector has fared amid economic headwinds and the challenges lying ahead. Talks kicked off on Saturday. In a global finance forum focusing on the new thinking, new trends, new practices, and new dynamics of China's financial reforms.

iFeng: 祁斌:未来五年是资本市场开放的重要窗口期 (Qi Bin: Next Five Years an Important Period For Capital Market Liberalization)
Our openness to emerging markets as good as they surrounded the market share of foreign investment is 20% -30% , we opened Hong Kong and Shanghai through, for over ten years QFII and RQFII after the opening has only 1.69 . March this month I went to Wall Street to do road shows, recommended Chinese capital market, it is hoped that global institutions are involved, I came back 15 years, 15 Chinese market has undergone great changes within the year, the US market has also undergone great changes, I leave when the Dow Jones is eight thousand points, is now eighteen thousand points. The world's largest capital market, the second largest capital market, but they are still isolated between the Chinese capital on Wall Street is far below the 1.69% share , we see this trend is unsustainable, there will be more two-way capital flows occur.

This figure is relatively obvious defect characterization market. For example, market volatility is relatively high, one of the factors to be improved because investors structure, the proportion of retail or individual investors holding only 25% , but contributed nearly 90% of trading volume, so the market volatility is relatively high.

Li Jiange said the stock connect was created because the RMB is not convertible, but once it is convertible, the connect will disappear.
iFeng: 李剑阁:A股游戏规则是中国特色的游戏规则

A-Shares Week Ahead

iFeng has coverage of the week ahead: 监管层周末急推1招意味深长 A股或现惊人大震荡

23 IPOs were approved on Friday: China approves China National Nuclear Power Corp IPO
The nuclear firm's approval was one of 23 companies to receive the go-ahead to list on Friday, according to the China Securities and Regulatory Commission.

Poland Turns Right

Law and Justice won the presidency: Polish president concedes election defeat to conservative challenger
Komorowski had originally been seen as a shoo-in for another term in office, and his defeat reflected a desire among voters for new faces, and a sense that Poland's new-found prosperity was not being shared out equally.

The outgoing president, an ally of Prime Minister Ewa Kopacz, announced he was conceding defeat after an exit poll showed he had won 47 percent to 53 percent for Duda. Official results have not yet been released.

"I respect your choice," Komorowski told a gathering of supporters. "I wish my challenger a successful presidency."

...It is close to the Catholic church, socially conservative, and markets see it as less business-friendly than the governing Civic Platform.
The president is not very powerful in the Polish government, but this could herald a power shift as parliamentary elections will follow in the fall.

H / A Share Discount List For 2015-05-25

Simple average discount climbed to 41% on Friday.

Fallout From Ordos Implosion Continues

The ghost city of Ordos is back in the headlines. The collapse of the city's real estate and private lending market began in 2011, but the fallout continues into 2015. Ordos is an extreme case, but only one of degree and circumstance. The pattern of speculation, private lending markets and government planning are typical of many cities in China. Ordos blew a larger bubble, fueled by natural resource prices in a resource dependent economy, which led to a twin collapse of the local economy and the real estate market. The sharp slowdown in Northeast China could turn into a wider Ordos replay should commodity prices begin another leg lower, perhaps courtesy of a Federal Reserve that hikes interest rates in a bid to head off healthcare inflation created by the Affordable Care Act.

Bloomberg: Yet Another Ghost Town in China Shows Extent of Regional Debt Crisis
Ordos City Huayan Investment Group Co., a developer whose chairman headed a group of livestock researchers, is at high risk of defaulting on 1.2 billion yuan ($194 million) of bonds if investors exercise an option to offload them in December, said Haitong Securities Co. and China Investment Securities Co. Also in the city, Inner Mongolia Hengda Highway Development Co. asked noteholders to defer rights to sell back private securities in April due to cash shortages, according to China International Capital Corp.

...Bond investors have demanded higher premiums to hold notes from the city. Elion Resources Group Co., which focuses on desertification prevention, sold 1 billion yuan of three-year AA rated debentures at 7.8 percent on May 7. That was 256 basis points higher than the average yield on similarly rated securities the same day. The yield on Ordos City Huayan’s 2018 bond has climbed this year to 9.63 percent since Pengyuan Credit Rating Co. cut the issuer rating from AA- to A and changed the outlook from stable to negative on Dec. 31.

...“Many small-city developers are running into financial trouble,” said Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency. “It’s the problem Ordos faces after its property bubble burst.”

...Cities suffering from declines in fiscal revenue need close scrutiny for potential debt failures, according to Zhang Chao, a bond analyst at China Investment Securities in Shenzhen. The highest-risk areas rely on resource production like Inner Mongolia and Shanxi, and also include northeastern provinces such as Heilongjiang and Liaoning, he said.
See the prior post: Industrial Production Slowdown Accelerates In Northeast

iFeng: 港媒:房地产市场不景气 鄂尔多斯开发商面临违约

Related: Erdos property values collapse
Capital and residents flee Ordos
Ghost city Ordos: financial contagion, suicides, loss of trust, 50-90% economic collapse
Gold Is Money; Ordos "City of Debt" Residents Settle Debts With Silver and Gold; Gold for Cars and Silver for Houses

2015-05-22

U.S. Derides China's Sandcastles

US warns China over provocative ‘sandcastles’ in South China Sea
Recent satellite images suggest that China has made rapid progress in filling in land in contested territory in the Spratly Islands and in building an airstrip suitable for military use and that it may be planning another.

“As China seeks to make sovereign land out of sandcastles and redraw maritime boundaries, it is eroding regional trust and undermining investor confidence,” Blinken said on Wednesday.

“Its behavior threatens to set a new precedent, whereby larger countries are free to intimidate smaller ones, and that provokes tensions, instability and can even lead to conflict.”
China should invite the seasteading people to go live there. They'll have far more productive use of the land, foreign civilians on their soil and a stronger claim of sovereignty over the man made islands.

Is the Seasteading Dream Really Dead?

Hanergy Refutes Rumors, Blames Collective Sneak Attack By Short Sellers

The Standard: Hanergy trashes rumors
Hanergy Thin Film Power Group (0566) denied all rumors yesterday behind the stock's more than 40 percent plunge on Wednesday that wiped off HK$144.30 billion in its market capitalization.
Trading in Hanergy shares remain suspended. In an announcement on the company's official website, it said operations remain normal and it is in a good financial position.

It noted no large shareholder had reduced its stake as some media reports had speculated.

The company statement refuted the rumors, but an insider says the shorts did it.

Every Factory Must Go, Easy Credit Available, Call Our Operators Now!

Beijing will set aside US$70 billion in capital for international ventures by Chinese enterprises as the country steps up infrastructure investment abroad amid an economic downturn and production over capacity.

Premier Li Keqiang announced yesterday during his visit to Brazil there would be a US$30 billion fund for promoting international cooperation in ventures that export China’s industrial capacity. In addition, China’s sovereign wealth fund, China Investment Corporation, would set up an overseas investment vehicle with a capitalisation possibly greater than the US$40 billion Silk Road Fund to support the strategy.

Li said the US$30 billion fund would be open to cooperation projects with no political strings attached. He said Chinese enterprises were willing to participate in railway construction, high-voltage electrical power transmission, internet technology and next-generation mobile telecommunications technology, Xinhua reported.
SCMP: US$70 billion plan to export China’s spare industrial capacity

Chinese Gentrify Vancouver, Why Not Sell The Whole Thing?

SCMP: Something is grotesquely wrong with Vancouver’s housing market, and the time for denialism is over
Fuelled by the special sauce of Chinese wealth - and good old Fear of Missing Out - prices have decoupled from the local economy, with an average detached price of about C$1.4 million (HK$8.9 million). So far, so normal for Vancouver.

But the past couple of months have witnessed a kind of awakening.

Eveline Xia - herself a Chinese immigrant - helped get the ball rolling with her very first tweet on March 18, in which the 29-year-old environmental scientist created the hashtag #donthave1million, and posted a plaintive cry about the drain of young Vancouverites being priced out of the city she loves. “To thrive, does @CityofVancouver not need people like you and me?” she asked.

It hit a nerve. Fellow millennials jumped on board #donthave1million, posting their own tales of real estate woe.

Around the same time, a petition sprang up on change.org, demanding that BC Premier Christy Clark and local mayors “restrict foreign investment in Greater Vancouver's residential real estate market”. The petition had about 24,000 supporters as of Wednesday.
It turns out the Chinese are gentrifying Vancouver:
Vancouverites still struggle to grasp the scale of this influx to their modestly-sized city. From 2005-2012, about 45,000 millionaire migrants arrived in Vancouver under just two wealth-determined schemes, the now-defunct Immigrant Investor Programme and the still-running Quebec Immigrant Investor Programme. Let’s put that in perspective. The entire United States only accepted 9,450 wealth migration applications in the same period under its famous EB-5 scheme, likely representing fewer than 30,000 individuals.

So, Vancouver has recently received more wealth-determined migration than any other city in the world, by a long stretch. This, in a city with some of the lowest incomes in Canada.
Formalize the process and make Vancouver a Chinese concession. Canada can request a Canadian concession in China in the interest of fostering trade and cultural links. Then Vancouver prices will be low because they will be measured by Chinese standards and the flood of money that comes in will allow the poor native Canadians sell their homes and move to Edmonton.

Middle Class Housing Shortage In Beijing?

Due to building low cost public housing and high cost land auctions for luxury developments, middle class housing supply may be too low to meet market demand. The situation is more acute when looking at homes ready to live in, since the area around new homes may lack key infrastructure such as schools.

One office worker quoted said, "We can't afford luxury, we can't win the lottery for public housing, and we don't want to live too far away, so what can we buy?"

On the left is home size by square meters, starting with below 50 sqm. Next is the number of homes, followed by the total area, and finally the share of total inventory on the right.

iFeng: 北京中产纠结换房路:豪宅买不起 刚需供应少

Google translated after the jump.

Land Sales Sink To 5-Year Low, Developers Rush To Move Inventory

"Now to the inventory is still the top priority, we are very careful about second-tier cities, third- and fourth-tier cities we have all withdrawn and in the future will basically no longer purchase land in these areas." A national housing prices president told reporters.

...May 19, when the reporter saw Li Wei (a pseudonym), he just returned from a business trip to Shanghai. As Beijing a medium-sized real estate group vice president in charge of the headquarters of the initial investment, the regional group concerned whenever there is land promotion, he would rush over to see.

"From the end of April to now this close to a month's time, basically to participate in land promotion in the field," Wei told reporters, "Jiangsu Sunan six cities, Yuhang, Chongqing, Wuhan, Shanghai, where are we to go , as well as the soil will push Sichuan, Hunan, Guangxi, several four-tier cities also gave us an invitation, but because we do not plan to purchase, so do not go."

...A bureau official in an Eastern capital city told reporters, "From the current situation, this year it will be difficult to hit land sales targets, developers are clenching their purse strings, we are powerless."

...In fact, the government worry is not excessive, in April the national land market slipped to the "freezing point."
Developers are nervous as well, even though sales are picking up. A sales director at a Beijing real estate firm said:
Now we're actually more nervous because everyone wants to move inventory, God only knows how long this period will last.
Developers aren't resting on hope that the market has turned; they're making hay while the Sun shines.

iFeng: 土地市场跌至五年冰点 房企拿地热情不高