Investor Mood Shifts on China

Reuters: China c.bank official sees downward pressure on economy persisting

Downward pressure on China's economy will persist in the second half of the year as growth in infrastructure spending and exports is unlikely to pick up, a senior central bank official was quoted as saying.

Chinese companies are not optimistic about business prospects according to the central bank's second-quarter survey, Sheng Songcheng, the director of the statistics division of the People's Bank of China (PBOC), was quoted as saying by the National Business Daily on Saturday.

...Sheng warned about the risks of local government debt, saying that 2 trillion yuan ($322.08 billion) in bond swaps may not be able to fully cover maturing debt, according to the report.

Sheng said the PBOC needs to step up the monitoring of local government financing vehicles given the current downturn in property market and limited local government revenues.

Sheng also said he expected second-quarter net profit growth for banks to fall, adding that banks' exposure to risk "has become clearer".

But he said the real-estate market could rebound in the second half and provide support for the economy.

Real estate will become an even larger part of the economy if the government goes back to this well yet again.

Li Ka-shing is selling Shanghai real estate and his moves are closely watched by Chinese investors.

WSJ: Li Ka-shing’s Cheung Kong Property Plans to Sell Shanghai Project

The asking price is around 60,000 yuan per square meter, the people said. According to Cheung Kong Property’s website, the shopping mall and office project occupies a total of about 269,000 square meters, which would bring the total asking price to more than 16 billion yuan ($2.6 billion).

...Over the past two years, companies backed by Mr. Li and his family have sold five office and shopping mall projects in Shanghai, Beijing, Nanjing and Guangzhou. Many investors eye moves by his companies for hints on the tycoon’s view of the property market.

His companies, including Hutchison Whampoa and ARA Asset Management Ltd., have been offloading their real-estate assets as China’s economy decelerates to its slowest growth in more than two decades.

Alphaville: The “whatever China needs” trade is over

And the HK- Shanghai stock connect was meant to be a piece of that. Didnt’ quite work out as desired though, what with a leverage-fuelled ramp up getting out of control (we imagine the Party wasn’t after quite that speedy an incline) and the intervention damaging the market further by killing the education that only a crash can bring. And that’s before we even discuss the lesson that if your stock rises you may well have trouble cashing out when you really need to. That said, after flattening out, this month the Shanghai Composite declined 14.3 per cent and Shenzhen stocks gave up 14.4 per cent, both their worst performances since August 2009. So lessons on both sides of this one.

Either way, right now, if you believe Pettis’s theory, the market is a mess where speculators trade consensus about consensus and into which only the brave would tread. It’s even less about value than it was previously, it’s about watching for Beijing’s next move. And it’s not as if Chinese companies had excelled at sharing their gains with private investors anyway.