2011-11-22

Abundant signs of Chinese slowdown; time to get bearish on the yuan?

This ad was in the newspaper on Friday. It's a huge front page ad in the real estate section, boasting a 22% price discount off upscale homes. (10% off in China is advertised as 90% of full price.)


Chinese forex purchases fall on outflows
Foreign exchange purchases fell in October for the first time since December 2007, slipping 24.9 billion yuan ($3.9 billion), central bank data showed on Monday.
The Chinese stock market had peaked one month earlier in 2007. The news here blames outflows of hot money, but this could manifest into a greater problem if the economy weakens.
Some analysts said the fall in foreign currency purchases also suggested the authorities had intervened in markets to buy yuan and prevent the unit from falling — a marked departure from its usual practice of trying to suppress gains in the currency. “The drop is rare and sharp, and happened when market concern about a hard handing for the economy were at a peak,” said Hua Zhongwei, an economist with Huachuang Securities.
If the Chinese government did move to defend the currency, then its time to get bearish on the yuan. This is very, very big news if true because it means the Chinese government is not confident about the value of the renminbi.

10月制造业用电环比降3.2% (Manufacturing electricity use fell 3.2% in October) This story reports that industrial consumption was up, but the manufacturing sector saw a month-on-month decline. Electricity use in this sector fell below June levels. Manufacturing leads the economy and this is one indicator to keep a close eye on.

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