2012-09-07

China bear market rally

Hong Kong and Mainland exchanges are hopping on stimulus news. Unfortunately, these projects aren't new and they are a drop in the bucket compared to the decline in real estate. They also will do nothing to plug the revenue holes facing local governments, nor the souring loans on bank balance sheets. What is happening is a bear market rally after weeks of shares slowly churning lower.
China adds highways to stimulus plan
China’s top economic planners on Thursday approved another batch of major infrastructure-investment projects, bolstering the more than two dozen subway and urban-rail initiatives announced a day earlier.

In the latest round of Keynesian-style stimulus designed to rekindle economic growth, the National Development and Reform Commission gave the go-ahead to 13 highway projects and other municipal and port projects, according to reports citing documents posted on the commission’s website.

Estimates on the size of the stimulus varied, with some reports putting the total number of projects at 20, while a separate report by Reuters had the figure at 30.

The measures follow Wednesday’s announcement of 25 new rail projects worth an estimated 800 billion yuan ($127 billion) over the next three to eight years. See related story on China’s new rail initiatives

Nomura economists said the value of the projects approved this week totaled 1 trillion yuan, or about 2.1% of the size of the Chinese economy last year.

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