2015-07-03

China's FMCG Market

Market pressures, consumer behaviors carve out a ‘new normal’ for china’s fast moving consumer goods brands
For the fourth consecutive year, Bain & Company partnered with Kantar Worldpanel to study the shopping behaviors of 40,000 Chinese households. The findings, published in a new report, Winning Over Shoppers in China's ‘New Normal', show a continued deceleration in overall market growth for fast-moving consumer goods (FMCG) categories – from nearly 12 percent in 2011-2012 to 4.4 percent during the first quarter of 2015. However, this deceleration was not uniform across the entire spectrum of FMCG categories; skin care, for example, rebounded in the last part of 2014 and early this year.

"Consumers' shifting shopping habits, the expansion of online channels and pricing dynamics have put the brakes on FMCG company growth in China once again," said Jason Yu, China General Manager of Kantar Worldpanel. "These trends are forcing brands to quickly understand the changes in the market and successfully adapt to the ‘new normal' they face."

...The research shows that the deceleration in China's FMCG market varies across sales channels. Hypermarkets' growth rate slowed by half, from 7.9 percent in 2013 to 3.7 percent in 2014 due to declining traffic. Traffic for smaller format supermarkets, mini-marts and convenience stories remained relatively stable. However, e-commerce continues to reign supreme in China, which is the largest digital retail market in the world. Online sales now represent 3.3 percent of all FMCG goods sold with sales growing by 34 percent last year. Chinese consumers are also rapidly making the leap to mobile retail. The research found that 80 percent of Chinese consumers who bought online in 2013 made at least one purchase from a smartphone.

Does China Have Gamblers Anonymous?

The drop in the stock market has led to a 70% increase in funds on a P2P finance platform. I suppose it is better than stamps.

Stock tangled, let p2p attract continued financial platform. "Kim Shin-week online turnover of 240 million yuan, an increase of 70%." Kim Shin-Founder, Chief Operating Officer 安丹 side said in an interview with the Economic Observer Network interview, due to the recent stock market remain volatile, many "injured "The investors began to focus attention once again to the relatively stable earnings P2P platform, the market trend has been emerging P2P flow of capital.
How relatively stable are we talking here?
According to recently released pat pat-prime "2007--2014 China's P2P personal unsecured microfinance market development report" shows, P2P microfinance personal unsecured loan demand soared 20 times the past four years, sub-regional perspective, P2P investment funds come from economically developed areas, particularly in the east, north regional investment activity highest in the northwest area of ​​low activity. P2P borrowing group is still mainly concentrated in the east, north, south and other economically developed coastal areas, northeast, northwest less than normal.
What's this about stamps again?

EO: A股持续震荡 金信网一周吸金2.4亿元

Poll: Falling Stock Market Will Lead to Falling Home Prices

Polls conducted on iFeng show Chinese would rather by homes over stocks, but far more people would prefer to buy neither. A majority of people believe falling stock prices will lead to falling home prices.

iFeng: 【调查】投资股市还是楼市 近六成网友表示两个都不买

2015-07-02

The ChiNext Dip is Bought

Top Story on iFeng: Buy The Dip!

Anxin analyst Xu Biao says the market will turn in 3 days tops, and there is a 60% retracement coming but only a max 4.5% downside, so buy the dip!

Emphasis in the original:
2, from China, the historical experience of the US stock market point of view, unless the Great Depression, the subprime crisis level of bad macro scenario experienced ten trading days, fell more than 20 percent, the market average amplitude from the bottom right and left about 4.5% not far! And after a rebound average of at least about 60%. Now, the potential benefits already far higher than the potential risks! From the relevant information reflect the view, after a sharp decline in some time ago, the agency disc has signs of stabilization. With the introduction of the relevant rescue measures, the market panic spread will be stopped, investors will soon recognize the potential benefits already far higher than the potential risks of this investment opportunity, capital stock will gradually reflux, Relay bounce!

iFeng: 安信策略:三日内静观其变!

Who Let The Bears Out

ChiNext broke to a new post-peak intraday low on Friday. Yesterday was a closing low. Fudging the limit down to about a 9.9% drop, there are over 1000 shares limit down right now on the Shanghai exchange.
So much for hiding at the bottom of the bottle, Luzhou Laojiao rapidly collapsed with the rest of the market once the selling accelerated.

Here are some stocks I highlighted in Chinese Price to Earnings Ratios; 5800 Times Earnings for Blankets, Only 275 Times For Internet Video only two weeks ago. The charts below show the performance since than June 19 post.

Mortgage Your House to Buy Stocks

Bloomberg: China to Individual Investors: Go Ahead, Bet the House on Stocks
In China, you can now literally bet the house on the nation’s tumultuous stock market.

Under new rules announced Wednesday by the country’s securities regulator, real estate has become an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker.

While the rule change was intended to help revive confidence in China’s $7.7 trillion stock market after a 24 percent slump in less than three weeks, analysts say securities firms may be reluctant to follow through. Accepting real estate as collateral would tether brokerages to another troubled sector of the economy, adding to risk-management challenges as they try to navigate the world’s most-volatile stock market.

“It does come across as relatively desperate,” said Wei Hou, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “Globally, illiquid assets such as real estate are not accepted as collateral as they are very hard to liquidate.”
When they allow Chinese farmers to bet the farm, then you know its over.

CSRC Goes Hunting for Witches

When all else fails, blame the witches.

Bloomberg: China to Crack Down on Market Manipulation as Stocks Fall Again
China’s markets regulator will investigate and “strictly” punish manipulation, it said after the country’s stocks plunged again on Thursday.

The China Securities Regulatory Commission will organize a probe with special focus on cross-market manipulation and will send criminal cases to the police, spokesman Zhang Xiaojun said in statement on its website on Thursday.

The regulator made its decision based on reports from China’s stock and future exchanges, which monitor unusual trading movements, Zhang said.
Making major policy announcements designed to move the market is not manipulation, but one man and a fat finger......

H / A Share Discount List for 2015-07-03


Bargain Hunting in Macau

Lots of stocks in Hong Kong haven't participated in the Chinese bull market. Some are in multi-month or longer bear markets, such as casino stocks.

Macau's gambling revenue falls to near 5-year low
Gambling revenue in the Chinese territory of Macau fell to a near five-year low in June, extending declines in the country's only legal casino hub to a thirteenth month while the rate of fall showed no signs of abating.

Revenue in the world's biggest gambling centre, which earns over five times more than Las Vegas, has been plummeting since President Xi Jinping initiated a crackdown on corruption targeting the illicit outflow of money from China.

Gambling revenue fell 36.2 percent in June to 17.4 billion patacas ($2.18 billion), the lowest level since November 2010, according to data released by the Macau government on Wednesday. The figure is better than analysts' forecast of a 39-40 percent decline.
How much of this is anti-corruption and how much is a slowing economy? In a China where officials watch what they order for dinner in public, are there still that many who were heading to Macau?

ChiNext And Shanghai Break Closing Lows

ChiNext avoided breaking its intraday low of 2485, Shanghai did break its intraday low during trading. Both closed at new lows for this current bear move.

Bloomberg: Shanghai Composite Tumbles Below 4,000 as State Support Fails
The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past. While China’s securities regulator eased margin-trading rules and the nation’s exchanges announced fee cuts overnight, the moves failed to revive confidence in a market that has wiped out the equivalent of France’s entire equity capitalization in three weeks.
“Four thousand is the psychologically critical level that should not have been broken,” said Castor Pang, head of research at Core Pacific Yamaichi in Hong Kong. “The government will have to and need to come up with more measures otherwise the market is poised to drop further.”
China's already into malinvestment and unforeseen consequences territory with the latest bout of intervention in the stock market.

Caixin: Gov't Once Again Tries to Pull Stock Market out of Nosedive
The Shanghai and Shenzhen bourses said later that day they had reached an agreement with the stock market's clearinghouse to cut the transaction fees they charge. The new rates, which will become effective on August 1, are about two-thirds of their current levels.

The bourses said they trimmed the fees to reduce investors' transaction costs on the orders of the securities regulator. Pervious changes have encouraged trading and led to market rallies.
The guaranteed to fail bailout moves are those designed to increase activity. Either you succeed because psychology hasn't shifted and reinflate the bubble, or it has zero effect because once psychology shifts, people require fundamental motivation to switch back. This happens with the housing market, where cuts in taxes and interest rates fail to spur buying. It happened all over the world with credit and lending. Once a borrower reaches peak debt, they do not want more debt even if the interest rate is 0%. Even Greece doesn't want more debt.

He says the most urgent task the regulator faces is to break the cycle of lower prices and forced sales to avoid triggering an avalanche of sell-offs, which he suggests may happen if the Shanghai Composite Index falls to about 3,400 points.

I can't remember where I saw it, but someone had a target around 2500-2800 if margin completely collapses. At 2500, the market would be a good value again and it would still be up year-over-year into November.


Chart from: Red China Goes Redder, Stocks Tumble Despite Government Ban On Bearish Talk

Cities Starting To Worry, Need Land Sales to Repay Debt

Chinese local governments must repay 1.86 trillion in debt this year and much of it is backed by land finance. Even if cities can swap new bonds for old debts, they can't reduce debt levels until the real estate market turns around.

Xian, Lanzhou, Qinghai and Henan province are among the local governments trying to rescue the housing market under heavy pressure to repay debt. Many governments backed debt with land finance, but with the housing market in the doldrums, they face an inability to pay. According to Centaline, land revenue is down 35.5% this year.

Buyers who tap Xian's public housing fund only need to make a 20% down payment and the whole household will get residency if they buy a 90 sqm or larger apartment. They will also have a full year of social insurance paid by the government. The upper loan limit from the public housing fund was raised to 750,000 yuan and immediate dependents can also use the funds. Industry insiders say the bailout exceeds expectations.

Xian's bailout is moderate compared to Lanzhou. Lanzhou also cut down payments to 20% for public housing fund loans, and workers only need pay in for 6 months to be eligible to borrow. Deed tax is cut to 1%, and for homes larger than 144 sqm, taxes are cut 50%. There are no restrictions on noin-residents, who can now buy as many homes as they want.

Cities in the Middle, West Northeast are under pressure from weak land sales.
"In order to stimulate the real estate market, increase the ability to repay local debt, local governments do not rule out the possibility of continued bailout moves." Zhou Zhifeng told reporters in Shenzhen, led by first-tier cities to pick up the property market is the case, a lot of fourth-tier cities housing prices did not stabilize and even still falling.

To ease the pressure on local debt in March this year the Ministry of Finance issued a one trillion yuan of local government debt stock of replacement debt limit; the end of May issued a second batch of 1 trillion yuan limit.

However, the local debt exchange is still "temporary solution." Xie Chen said, for many cities, if always replacing old debt with new debt, annual interest is a huge amount of spending. "Fundamentally speaking, only by changing the local real estate market trend can cities then gradually solve the local government debt repayment problem."
iFeng: 1.86万亿地方债压顶 多地现“大尺度”救市

Henan rescue. iFeng:河南出台保持楼市健康发展的住房消费“新五条”

Sohu: 多环节刺激楼市 城市间分化愈加明显

2015-07-01

CREIS: Chinese Home Builders Reach 40% of Yearly Sales Target in 1H, Growth Ceiling Hit

Developers will focus on reducing inventory in the second half of the year. The average firm completed only 41.4% of its sales target for the year, with some under 40% that will be under pressure in the second half. A clear growth rate ceiling has been hit by the developers, with the average firm aiming for 9% growth in 2015.

In the lead, Evergrande hit 60% of its target in the first half, followed by 59% at Wharf Holdings. At the bottom, Sino Ocean Land only hit 29% of its sales target; China Merchants Property reached 34%.

iFeng: 房企半年报:销售目标完成四成 下半年去库存

H / A Share Discount List for 2015-07-02

HK was closed yesterday, so the drop in China closed the valuation gap. Average discount fell to about 41%.

Housing Market Has Stabilized, But Risks Are Present

Four issues are in play according to the article linked below.

1. Bifurcation. First-tier and top second-tier cities such as Xiamen and Wuhan are rising in price. Elsewhere, the recovery is far more muted, if there is even a recovery.

2. Lack of demand. The price-to-income ratio is still large in many cities. Recent spikes in sales are likely due to pent up demand, not a permanent rise in demand.

3. Demographics (one-child policy results hitting) and population migration away from formerly successful industrial cities.
Management Consulting Rui letter president Xue regression noted above, the Yangtze River Delta, Pearl River Delta surrounding issues facing many second and third tier cities, because of local industrial transformation and upgrading is not successful, high-end talent flows to cities, the low-end population to return home, the population Drain increased year by year, resulting in the second and third tier cities successor sluggish property market.

4. Land finance still contracting.
Real estate data show that in 2015 Beijing land market supply significantly decrease. Analyst pointed out: From the point of view of land transactions in 2015 Beijing the average floor price of land rose by 26%, but because of decreased supply, Beijing Total land transfer in June 25 only 64.822 billion yuan.

Data show that the first half of 2014, Beijing land transfer amounted to 111.52 billion yuan, this calculation, the first half of 2015 fell 41.87 percent in the first half 2014.
First- and second-tier land sales are improving, but if land sales increase too much, housing supply will go up and put pressure on home prices.......

Conclusion:
To sum up, price rise difficult, be wary of the next crisis that follows the downward trend. Therefore, it has been held by a large number of real estate investors need appropriate reduction, especially reduction of the small size, low rental income, age-old estate. Do not let the media misled the investment direction, after soaring difficult period, it is the "bricks change to paper" time.

iFeng: 中国楼市到“砖头换纸”时刻 需警惕明日危机