Chinese Home Prices Rise 1 pc in September

While there were some cases of real estate rage in late September and early October as developers took advantage of holidays, the topping process is still producing rising prices. New home prices rose 1 percent nationally in September. Only three cities saw falling prices: Shanghai, Shenzhen and Jinhua. Shenzhen saw the largest drop of 0.2 percent. On the other side. Xi'an led with a price increase of 6.2 percent.

Existing home prices showed a larger decline with only 59 cities rising and 7 declining. The average increase was 0.9 percent.


Federal Reserve Tiny Balance Sheet Reduction Last Week

The Fed's balance sheet declined $1.4 billion last week, none of it treasuries. The Fed hasn't reduced anything in October yet. It still has $50 billion total and $30 billion in treasuries to go. It's already behind the curve, needing to reduce $39 billion in treasuries to catch-up. It will fall behind again this month because only $23 billion in treasuries mature.

Liu He Wants to Help SMEs Too

Liu He joins Li Keqiang in his support for SMEs.

21st Century: 刘鹤:采取精准有效措施 大力支持中小微企业发展
According to the Chinese government network, the second meeting of the State Council Leading Group for Promoting the Development of Small and Medium Enterprises was held in Beijing on October 17. Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and leader of the State Council's Leading Group for Promoting SME Development, presided over the meeting and delivered a speech. Previously, the leadership team made adjustments in June this year and held its first meeting on August 20.

"In less than two months, the leading group held another meeting, which not only has important economic significance, but also has important political and social significance." Liu Junhai, director of the Institute of Commercial Law of Renmin University of China, said.

"On the one hand, the conference promotes the high-quality development of small and medium-sized enterprises' prescriptions; on the other hand, under the turmoil of capital market and the pressure of international trade, the conference released policies to optimize the business environment for SMEs and the private economy. Signal." Liu Junhai told the 21st Century Business Herald reporter.

The meeting stressed that it is necessary to adhere to the basic economic system and give full play to the important role of small, medium and micro enterprises and private economy in China's economic and social development. We must attach great importance to the outstanding difficulties faced by small and medium-sized enterprises, and adopt precise and effective measures to support the development of small and medium-sized enterprises.
Social security and financing costs are top of the list.
"At present, the more pressing and prominent problem is how to deal with the unified collection of social security fees. The State Council executive meeting stressed that before the reform of social security collection agencies is in place, all localities must maintain the existing collection policy unchanged, which requires a study on the appropriate reduction of social security rates. To ensure that the overall burden is not increased," Wen Bin, chief researcher of China Minsheng Bank, told the 21st Century Business Herald.

“At the meeting, entrepreneurs’ representatives reported some common problems in the development of SMEs. I personally think that it is more difficult to raise financing difficulties.” Yang Lin said.

The meeting stressed that it is necessary to further deepen the research and study of policies and measures to support the development of small and medium-sized enterprises in reducing the burden of taxes and fees, solving financing problems, improving environmental protection, improving scientific and technological innovation capabilities, and strengthening international cooperation, and promoting the high-quality development of small and medium-sized enterprises.
Zhang Wenhong introduced that at the end of September 2018, the balance of small-scale micro-loans (including small and micro-enterprise loans and individual industrial and commercial households and small and micro-enterprise main operating loans) with a single-person credit of less than 5 million yuan was 7.73 trillion yuan, and the balance increased year-on-year. 18.1%, the growth rate is 8.3 percentage points higher than the end of the previous year. In September 2018, the average loan interest rate of newly issued small and micro enterprises was less than 6.25%, which was 0.17 percentage points lower than the first half.
Maybe one day there will be a policy to help SMEs. Maybe.


September Investment Data on Cruise Control

A-Shares Bear Casualty: First Delisting for Trading Below 1 Yuan Imminent

If a stock trades below par value for 20 consecutive days, it will be delisted from the Shenzhen Stock Exchange. Zhonghong (000979) has traded below 1 yuan for 19 days cannot climb back above 1 yuan per share because of the daily limit of 10 percent.
21st Century: A股首例:中弘股份“脱仙”无望退市几成定局
If there is no accident, Zhonghong shares (000979.SZ) will be a big probability in the near future to become the first A-share listed company that has been delisted because its share price continues to be lower than 1 yuan/share (ie “penny stock”). the company.

On October 17th, Zhonghong shares, which was once hoped to be "protected by the shell", were suddenly seen to collapse at the end of the day and closed at 0.82 yuan per share. According to statistics, this is the 19th consecutive trading day of Zhonghong’s share price lasting below 1 yuan/share.

At the same time, this also means that even if on October 18, Zhonghong shares closed limit up, its stock price would still be only 0.9 yuan/share, which is still a “penny stock”. According to the relevant regulations of the Shenzhen Stock Exchange, Zhonghong shares may be terminated.

...According to the relevant regulations of the Shenzhen Stock Exchange, the closing price of the listed company's stock for 20 consecutive trading days (excluding the trading day in which the company's stock is suspended throughout the day) is lower than the stock's face value, and the Shenzhen Stock Exchange terminates the company's stock listing and trading. In August and September, Zhonghong’s share price also lasted below the face value of 1 yuan, but the closing price of the 16th trading day briefly rebounded to 1 yuan/share, thus temporarily defusing the risk of delisting.


China TSF Adjustment: Local Govt Debt Added

In the prior post on the latest credit and money supply data, I noted there was a big jump in total outstanding TSF, one likely accounted for by adjustments.

The PBoC added local government debt into the figures. The revision comes a month after a similarly large revision.

ZeroHedge: China Changes Definition Of Aggregate Financing To Disguise Sharp Credit Slowdown
However, this being China, there was as usual a big footnote with this latest credit data: starting this month, the PBoC further adjusted its definition of aggregate financing by including net financing through local government special bond issuance - just two months after it added asset-backed securities (ABS) and non-performing loan write-offs into this measure - and the same LGFV source of debt which yesterday S&P said could contain as much as $5.8 trillion in off balance sheet debt.
I haven't seen revised numbers yet, so here's the chart with only the September number revised to show the magnitude of the change.

M2 Growth Faster Than Expected in Sept

Reuters: China Sept new loans rise to 1.38 trln yuan, above forecasts
Chinese banks extended 1.38 trillion yuan ($199.25 billion) in net new yuan loans in September, more than analysts had expected and up from the previous month.

Analysts polled by Reuters had predicted new yuan loans of 1.35 trillion yuan, up from 1.28 trillion yuan in August.

Broad M2 money supply grew 8.3 percent in September from a year earlier, central bank data showed on Wednesday. Analysts had expected M2 to rise 8.3 percent, compared with 8.2 percent for August.
CNBC: China total social financing rises to 2.21 trln yuan in September
China's total social financing (TSF), a broad measure of credit and liquidity in the economy, rose to 2.21 trillion yuan ($319.08 billion) in September from 1.52 trillion yuan in August, data from the central bank showed on Wednesday.
Looks like another statistical adjustment was made since the PBoC claims TSF stock rose 106 percent yoy, but the reported figure of 197.3 trillion is more than 13 percent higher than year-ago figures.


Chinese Debt Risk Rising

China has 179 trillion in M2 money supply ($26 trillion). There are $3 trillion in currency reserves, about 11.5 percent of M2.

M2 is a conservative measure of money supply because it doesn't include off-balance sheet items that might eventually end up in money supply should the central bank monetize it.

Bloomberg: China May Have $5.8 Trillion in Hidden Debt With ‘Titanic’ Risks
“The potential amount of debt is an iceberg with titanic credit risks,” S&P credit analysts led by Gloria Lu wrote in a report Tuesday. Much of the build-up relates to local government financing vehicles, which don’t necessarily have the full financial backing of local governments themselves.

...Even with the central government’s shift toward stimulus, however, S&P sees Beijing determined to “bring discipline to the financing practices of local governments and their LGFVs.” That ultimately may mean local authorities aren’t fully able to keep LGFVs afloat, however, and the bottom line is “the default risk of LGFVs is increasing.”
There's no evidence of fiscal discipline yet. All previous attempts failed. China works hard to avoid private bond defaults. Authorities might make an example of someone, but it will not allow widespread defaults. The debt will be rolled over, eventually monetized (directly or indirectly) by a bailout.