From Bloomberg, Aug 9, 2015
China Securities Finance Corp. has quickly become one of the most influential investors in the Chinese stock market, with $483 billion of firepower and the potential to add $322 billion
Here’s a look at some of the biggest CSF positions tracked by Bloomberg, all of which the agency has initiated or increased since June 30
They include rail
1) China Railway Group Ltd. * CSF’s holding: 10.4 billion yuan ($1.7 billion)
* Company description: One of China’s largest railway construction contractors
* Return since June 30: -2.1%
* Price-to-earnings ratio: 28
* Market capitalization: 275.1 billion yuan
2) China Railway Construction Corp. * CSF’s holding: 9.1 billion yuan
* Company description: Railway construction contractor
* Return since June 30: 7.2%
* Price-to-earnings ratio: 18
* Market capitalization: 211.7 billion yuan
To read the entire article, go to http://bloom.bg/1PeQ4e
From Bloomberg, Jul 13, 2015
Forget about all the shoes, toys and other exports. China may soon have another thing to offer the world: a recession.
True or False? Do we have sufficient evidence of this argument?
To read the entire article, go to http://bloom.bg/1Gi6POT
The China stimulated recession is the prediction from Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, who says a continuation of China’s slowdown in the next years may drag global economic growth below 2 percent.
That 2 percent is a threshold he views as equivalent to a world recession.
If true, it would be the first global slump over the past 50 year without the U.S. economy also contracting.
China accounted for 38 percent of the global growth last year, up from 23 percent in 2010, according to Morgan Stanley.
China is the world’s largest importer of copper, aluminum and cotton, and the biggest trading partner for countries from Brazil to South Africa.
China’s economic slowdown will thus have an enormous global impact from mines to railways and to ports.
Greece gets all the financial headlines while the real economic story may be in China.
The Bloomberg report tonight Jul 7, 2015 points out that Chinese shares lost to negative territory on Tuesday. The benchmark Shanghai Composite Index was down finished at 3,727.13 points. The Shenzhen Component Index slumped 5.8 percent to close at 11,375.6 points. (Xinhua/Pan Yulong)
A wave of 1,249 Chinese companies halted trading in their shares. That is estimated at over 40% of those listed.
Also, CHINESE regulators unveiled new measures to prop up the value of small-cap stocks in the latest attempts to stem a rout that’s wiped more than $3.5 trillion of value.
To read the entire article, go to http://bloom.bg/1Tk4PyJ
As one of my friends who travels to China a lot has warned, the stock market often appears like a wild casino game. With very little education about market risks, the current drop in value is hurting the middle class and young investors very hard.
What is the long term impact to China’s growth strategy?
As the BBC reports tonight, in China, unlike in the European or US markets, individuals make up around 80% of the stock market investors. Many of them are new and inexperienced, often following whim and rumour to make decisions. This can lead to “herd behavior”.
China a leaders had been seeing a buoyant stock market as a key part of its strategic shift to a consumer society with rapidly increasing share ownership.
Now they need a Plan B.
See BBC full story on 7 July 2015.
Are we paying attention? This assessment below, if true, will shut off a lot of hoped for iron ore mine and rail products from Africa to Mongolia. Mine executives hoping for a return to market demand prices of $90 and higher are betting upwind based on the evidence this past two years.
Mining Weekly picked up the following iron ore demand/supply information from different sources. Reuters is one source. Bloomberg another. The predictions for a higher iron ore price market keep getting worse. Up to half of iron-ore output by miners outside the three mega producers in Australia and Brazil may be at risk of closure or at least significant production and export cutbacks. This will occur with global demand set to peak at about 1.4 billion tons next year, according to Goldman Sachs analysts. Production volumes among top miners – Vale, Rio Tinto and BHP Billiton – may not be at risk, the bank said. But their profit margins are dropping further.
Goldman Sachs, in contrast, predicted that the rest of the iron ore industry (and the railways and maritime forces that service the export industry) is “now facing an existential challenge..”
Goldman analysts Christian Lelong and Amber Cai said in a report that “We expect seaborne iron ore demand to peak in 2016 as the displacement of marginal Chinese iron ore production fails to offset a contraction in China’s domestic steel consumption.”
Goldman cut its 2015 iron-ore price estimate by 18% to $52 a tonne. It forecast $44 in 2016 and $40 in 2017 and 2018. That is down 29% to 33% from previous estimates. Other sources like Moody’s estimate that the delivered Iron ore price could drop to $40 this year and next. No one is seriously talking out loud anymore about a price surge up towards $90 or more.
Current China delivered price for Iron ore hit $46.70 on April 2. That is based on the current spot-based price system — compiled by Goldman Sachs. Strategic planners with projects depending upon iron ore new export projects coming on line before 2018 — or maybe even staying in business. — really need a Plan B. Their current plans are based on the iron ore world changes seen about four to ten years ago.
What is your prediction?