Monday, September 1, 2014

A Bubble May Be Bursting in China Property

For 31-year old Beijing resident Wang Yuanzhi, talk about a bubble in Chinese property is not something to be too concerned about.

“If you look at the real estate market in China, it has already seen a golden decade of extreme fast growth. There will still be room for growth in this market, even in the next ten to twenty years,” said Wang, who bought a home under construction last December. “The whole housing bubble is a fear; it is a concentration on the risks that the real estate market faces.”

Underlying confidence expressed by residents such as Wang may be what China’s authorities hope will aid a recovery in a market that has seen prices fall for three straight months.

CNBC

Poor Economic Data Rattles Faith in Abenomics

As poor economic data rattles faith in Abenomics following the April consumption tax hike, one analyst told CNBC that uncertainty over the outlook for Japan’s economy will linger for some time.

“With the consumption tax, we’re not done with this… as the government is poised to take it from 8 to 10 percent next October,” Paul Sheard, chief global economist at Standard & Poor’s Ratings Services told CNBC Asia’s “Squawk Box.”

“So if they go ahead with that we’re still going to be – for the next year to year and a half – in this no man’s land of not knowing whether what [Bank of Japan Governor Haruhiko] Kuroda is doing is successful,” he added.

CNBC

Sunday, August 31, 2014

Germany Leads Disharmony in Europe’s Repair

German Finance Minister Wolfgang Schaeuble said deficit-fueled growth leads to economic decline, signaling discord with Italy and France as euro-area policy makers seek ways to avoid deflation and spur growth.

Euro-area countries that pursued austerity policies in return for sovereign bailouts are “doing much better than all the others in Europe,” Schaeuble said at a town-hall event in Berlin yesterday. “That’s how it is with medicine: sometimes it tastes bitter for a while. But if it helps, that’s good.”

With France urging the European Central Bank to help spark its stagnant economy, German Chancellor Angela Merkel called ECB President Mario Draghi last week to clarify his stance on fiscal discipline after he suggested governments could spend more to promote growth, Der Spiegel reported in this week’s magazine. Hollande is due to meet with Draghi today in Paris.

Bloomberg

ECB’s Draghi Considering Large-Scale Bond Purchases

Between Mario Draghi and quantitative easing lies an obstacle course.

The European Central Bank president’s signal that he’s considering large-scale bond purchases raises the question of how to surmount hurdles from political and legal challenges to conflicts with measures announced just three months ago. For policy makers meeting in Frankfurt this week, those factors add to an already complicated debate on how to shore up a euro-area economy that’s edging closer to deflation.

Banks including Nomura International Plc and UniCredit SpA say the odds of QE have increased since Draghi warned at last month’s high-profile central banking conference in Jackson Hole, Wyoming, that the outlook for prices is worsening. Few see such drastic action right away.

Bloomberg

Asian Equities Higher after China PMI

Most Asian stocks rose, after the regional benchmark index capped its first monthly drop in four months, as investors weighed whether Chinese policy makers will add stimulus after reports showing slower manufacturing growth.

The MSCI Asia Pacific Index (MXAP) added 0.2 percent to 148.19 as of 10:55 a.m. in Tokyo, with five shares advancing for every three that fell. The gauge dropped 0.6 percent in August, the first monthly loss since April. European Union governments agreed to impose new sanctions on Russia if the conflict in Ukraine worsens. Two gauges of China’s manufacturing industry missed estimates.

“The market seems to be treating bad news as good news,” Nader Naeimi, who helps oversee about $131 billion as Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd. “China may introduce more stimulus as economic data weakens. What’s happening in Ukraine is unfortunate but the damage to the global economy will likely be minimal.”

Bloomberg

China Manufacturing Pulls Back

China’s manufacturing expanded at a slower pace last month, joining weaker-than-anticipated credit, production and investment data in suggesting the economy is losing momentum.

The Purchasing Managers’ Index (MXAP) was at 51.1 for August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing, missing the median 51.2 estimate in a Bloomberg News survey. The final reading of a separate manufacturing gauge issued by HSBC Holdings Plc and Markit Economics was 50.2. Both readings dropped from 51.7 in July and remain above 50, indicating expansion.

A pullback in manufacturing, coming as the property market slumps, adds pressure on the government to step up efforts to meet its expansion target of 7.5 percent this year. More stimulus measures will be announced in the next few weeks, said Lu Ting, Bank of America Corp.’s Hong Kong-based head of Greater China economics.

Bloomberg