# China: The Big Picture...



## haunting (12 August 2009)

** the SSE is sending out a very strong signal today, the third in the last few days. Like typhoon Morakot, it will be devastating to the markets in the Asian region... including ASX.


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## haunting (14 August 2009)

No Recovery Though Until Container Ship Glut Goes...

** this is one view that kind of support why "it" is not over yet, but it pays to keep this in mind if you are buying this argument, that is, most people, or the author of this report, tend to fall into the trap of comparing with the peak of the bull market (of everything). 

In this case, he is comparing with the 2007 shipping peak... but is that realistic? By doing so, he is ignoring there was an exuberance sweeping over the globe and the shipping industry at that time and a lot of excess capacity (wasted investments) had been injected into the sector, which, by all accounts, or using the reversing to mean long term trend argument, this excess capacity should be regarded as an exception, and should not be taken as the comparison or reference point. The standard, or the mean of the long term trend would probably make a better and more meaningful comparison.

In any case, the market is ignoring any of this kind of economic news or data, it's convinced it's bullet proof as of this moment, so it shall rally on regardless. Until the divi season is out, it will be short term momentum play, for moi at least.


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## haunting (17 August 2009)

Click and see for yourself...

** the rapid decline such as today's will begin to "scare" the other Asian markets, like what you are seeing in Hang Seng and Nikkei... I take that to indicate the foreign speculators with easy money are slowly pulling out and are moving back to safer markets - where?

... have a guess.


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## haunting (19 August 2009)

Thought I like to add this observation this morning - the US markets' bounce last night is quite pathetic in terms of volume and turnover. It is hardly a case for jubilation. I am expecting further decline in days ahead.


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## haunting (19 August 2009)

Copper Stockpiled by China’s Pig Farmers May Be Sold...

Iron Ore Cash Prices to China Likely ‘Topped Out,’ Liberum Says


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## haunting (22 August 2009)

Shock of the new, by Paul Kelly

** some of the media responses to the recent Chinese diplomatic manoeuvre vs her economic dealing with Australia, in my view reflect a lack of understanding of China's self perception, her perception of national integrity and her world view, which extends to her economic cum political position with countries within the Asia-Pac region, which includes Australia. 

Like it or not, from Australia's angle, having a successful economic relationship with China would mean she has to play ball with China, according to the Chinese rules - this is the message China is now sending out to this country. 

Has it crossed anyone's mind the timing of both these announcements: Australia's biggest gas deal with China and China's cancellation of high level official, Li Keqiang's (the future Chinese President) visit to Australia?

Can the Chinese be this "dumb"? On the one hand she is wielding a big stick warning Australia of her displeasure but yet on the other, she slaps herself in her face by giving out a big carrot to Australia? Can she not do this better? Timing wise?

What are the messages and their significance the Chinese is trying to send to Krudd and his govt? 

1) the fact that they are sending the future President-in-waiting to Australia for a visit is a very significant gesture of their goodwill and the importance they regard Australia - firstly as a trading partner, secondly as a "friend" in the Asia-Pac region

2) the fact that they have now cancelled Li's visit indicates how "pissed" they are with Australia at this moment, esp with regard to the visit of Uighur leader Rebiya Kadeer recently. There is a huge difference between Rebiya and Dalai Lama in terms of angst to the Chinese because they see Rebiya as a terrorist and her hands are full of Chinese blood in the recent Uighur riot. 

If anyone finds this to be just another Chinese bullying tactics then, may be they can try imagine what's the reaction would be if China were to invite Osama Bin Laden to Beijing for a speech and show a few of his video and then telling everyone China will do what she likes, as it is her right as a sovereign nation.

Sensitivity and diplomacy - lacking either one will not work for a successful long term relationship. There is a price to pay at some point, for everything...

3) the biggest gas deal for Australia and yet there's a Chinese media blackout?

... whilst in Australia Krudd and his govt are making full use of the deal for political mileage.

What's the message here?

Very simple - this is the carrot. Point 2 above is the stick... China's message is this - choose one - big stick or big carrot?

I am quite sure the recall of Australia's envoy from China carries just this message - it's crunch time - choose!


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## haunting (24 August 2009)

The butt of Asian jokes...



> _Prime Minister Rudd needs to work harder to get to China and talk to the Chinese in Mandarin – not about Tibet, but about Australia and China. If we don’t, then with America in decline we will become more and more isolated. Long term, this is serious. _




** my exact sentiment!

** racist joke? Here's one - one of my Indian friend's fav joke is to lift his foot and show me the sole with this line: "I don't like to discriminate others based on the colour of their skin...".


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## haunting (24 August 2009)

Diplomatic Crean does the hard yards in China talks



> _Much of the huffing and puffing in China has come from the country's Global Times, a nationalistic tabloid styled on the western model. It's run by the Communist Party's very own People's Daily Group, and is part of a new propaganda strategy..._




** jeezzz, gotta say I hate this guy's rant as a journalist. The last thing you want to do is to belittle the Chinese official media where the public nationalistic fervour can be easily raised by them resulting in silly Aussie boycotts resonating in the net. What a nitwit... can he not lie low just for a while and let the whole freaking thing blow over first? *&&^%


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## haunting (24 August 2009)

Coal Rally Ending as China Shuns Imports, Opens Mines

** here's what to expect: a) IO price has dropped by 33%, with sales volume declining; b) coal price has dropped more than 40% and/or more as reported recently...

Now with China actively cutting back their coal imports, what's the chance of coal exports from Australia to pick up in volume?

With two major commodity exports taking a hit, what's the likely outcome of balance of payment in the next half?

Other than the obvious, Chinese tourists, according to news have begun to drop due to fear of swine flu and the negative media reports in China, that's a 2.2 bln worth of business and it is shrinking slowly...

Similarly Chinese students are rethinking their plan of coming to Australia because of the bad publicity in India... the overseas student market I believe is much bigger than the inbound tourism.

Again, by adding all these, what's the chance of seeing a prosperous and booming second half? 

Will it affect the market?


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## haunting (24 August 2009)

China Passes U.S., U.K. in Commercial-Property Sales

Chinese Demand Is Driving Japan Growth, Cabinet Economist Says


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## haunting (25 August 2009)

Behind the release of Chinese activists...



> _Beijing sources said the Obama Administration had made senior representations to urge the Chinese Government to release Mr Xu in particular, and others including Professor Tohti, in order to remove an ''irritant'' to a smooth presidential visit.
> 
> Publicly, however, the Obama Administration has been virtually silent on China's human rights problems, with Secretary of State Hillary Clinton controversially saying in February that human rights should not interfere with global policy concerns such as climate change._




** the louder you protest, the harder and harsher would be the reaction... there's something that Australia has yet to learn I reckon.


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## haunting (26 August 2009)

Rule of the iron rooster

** nothing unusual from these mobs whose own country at this point is still wallowing in their miserable recession whilst Germany and France are clearly racing ahead without them. What's the problem with these people?

Well, for a start, they have never failed to assume a negative slant when talking about the Chinese economy, just like the way they have been bagging the Chinese Olympics. It's all negative, if it's not the weather, then its the locale or the people, etc... what a whinging bunch of losers.

In any case, yes the Chinese might have overheated their economy, and yes, they might have channelled their funds into the wrong areas, and yes, they might be facing their music soon, but, let me just remind them with this single observation - the Chinese equity market is correcting, and in a very vigorous fashion - can they see this?

Can they step back and have a second thought? Can they see the Chinese authority's "power" and control over their country? If the equity market is over heated, ok, they just simply turned off the tap of liquidity and promptly gave the equity market a cold shower... cool!

What else? More domestic consumption? Well they are raising the wages of the worker and they are talking about reducing taxes now. 

Still not enough? Ok, they are consolidating their iron and steel sectors just to make sure RIO would not rip them off in the future. That means less money for the Pommy investors. Too bad.

Anything else? More road? More railway? More airport? What's wrong with that? They can afford to burn their hoard of US$, that's why!

The point is this - just don't forget China is an authoritarian country and don't judge the Chinese as if they are like a bunch of whingers. The Chinese don't like to whinge and they don't like to tell others how to f**k all the time , you dig?

...when come time to work, they work and they work hard. That's all! That's how and why China can afford to build to waste. You can do it too if you can control you urge to whinge and start working hard like the Chinese.

Do it soon or the French and the German will begin laughing at you...


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## haunting (31 August 2009)

China, HK shares headed for rocky end to gloomy Aug

** it's worth noting this - @2667, the SSE is sitting at about 45% fibo retracement from the top (or around there). 50% is located at around 2577. At these two levels, it's important to see some kind of support coming in, and if the Chinese govt were to let it drop further, the next important fibo level will be at around 2365 (61.8%). That will be another 12% drop from 2667, which is quite substantial. The erosion of confidence at that level would be similarly substantial and will definitely rub off in the Hangseng. Those who are trading the HSI would need to keep this in mind.

From a fundamental angle, there is no denying that much of the foreign speculative funds into China have been beating a retreat and seem to be accelerating lately... the question: where are they flowing to as an alternative to the Chinese market?


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## haunting (31 August 2009)

> _the historically significant Japan elections over the weekend, the end of LDP
> rule could also see Japan moving away from its policy of export-dependence and
> exporting domestic savings overseas into high yielding assets, a policy that
> discouraged JPY appreciation. A policy bias towards relying more domestic demand
> ...




** comment from DBS, and good question...

** In any case, it's September where it's the season of doubt for the bulls "traditionally". Over in the ASX, the divy season is still quite okay but fast fading...


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## haunting (31 August 2009)

Inflation Will Accelerate This Decade, Business Economists Say 



> _The Federal Reserve will be unable to prevent the trillions of dollars in government stimulus pumped into the U.S. economy from stoking inflation later this decade, a survey of business economists showed.
> 
> The price gauge tracked by the central bank will rise 3 percent a year on average from 2014 through 2018, according to the median estimate in a poll taken by the National Association for Business Economics. The rate exceeds the 2 percent pace that the respondents said was the Fed’s unofficial target.
> ...
> “An excessively stimulative fiscal policy and a complicated exit from its quantitative easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires,” according to a statement issued by the Washington-based group today. _




** if you are a goldbug, just make sure you can outlive 2014...


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## haunting (2 September 2009)

China Can Not Be The Main Locomotive Of Growth



> _The biggest risk was that this crisis was caused by excessive leverage, and accumulation of debt by US houses, by the financial system, the corporate sector. And while there is talk of deleveraging, in reality there has not been much deleevraging.
> 
> The debt ratios of banks and houses are very high, and the houses have barely started saving – so instead what we’ve done is been to socialize these private losses and now we have a massive releveraging of the public sector with large and unsustainable budget deficits, that are leading to accumulation of public debt -  over ten trillion over next ten years – and these budget deficits in direct accumulation of debt may lead to another crisis. _




** frankly, not a fan of Roubini, but found this summary succinct...

By x-ref to this older blog, the double dip recession scenario seems to be building up in momentum amongst the "seers", this pressure in time will prompt the Feds and Bernanke to act I reckon.  Based on his recent speech, many are already saying he is preparing the law makers and the public over in the USA to prepare for QE easing and possibly interest rate adjustment.

In another tangent, the current argument on inflation and deflation scenarios, I think is a waste of time because the outcome in the long term is quite obvious - take a look at the twin deficits effect on the economy of the USA since Ronald Reagan's time to the present time and its culminating effect on the US inflation (and the devaluation of the US$) over the same period, it's really not hard to conclude at this point that - for as long as the US is carrying a huge deficit in its budget, inflation will win. And with an exploding deficit running into trillions, inflation WILL WIN ultimately.

Corollary, gold, commodities, real assets and other commo-currencies such as AUD, and anti-US$-currencies such as RMB/YEN will be good contrarian investment in the long term, assuming the effect of inflation and the depreciation of the US$ is unavoidable.


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## haunting (2 September 2009)

Asia to dominate future global growth, says Pimco



> _"It's time to recognise that things have changed and that they will continue to change for the next -- yes, the next 10 years and maybe even the next 20 years."
> 
> The new paradigm also includes the US no longer being the world's consumer vacuum cleaner, with savings rates now approaching 10 per cent.
> 
> ...




** make a lot of sense... the "new normal" should also see the rise of "credits" as against the fall of "debts".

And to give the whole Asia future argument a perspective from Australia's point of view, read this and hope it makes more sense to those who are uninitiated...



> _The value in the relationship with China is primarily earned by Australia’s exports (mostly commodities) to China, with a value of $37.4 billion. With its relatively tiny population and capacity for consumption, Australia doesn’t even appear on a table of China’s top export destinations.
> 
> It's important for Australia’s leaders, and indeed media commentators, to understand that a large part of having a relationship with China is understanding Australia’s place in the relationship. We are indeed peers, but geopolitically and economically, we are not equals. Fundamentally, the economic question is: who you believe has more power in an economic relationship – the buyer or the seller? While every scenario presents its own unique circumstances, in this one, it’s the buyer.
> 
> China will always be a customer for Australian goods and services, most importantly commodities. But for Australia to have a truly meaningful relationship with the Middle Kingdom, it would be helpful if more international news made it into the mainstream media, rather than being confined to SBS or the back half-page of the major daily newspapers, and start seeing their problems with China in the context of wider economic and geo-political debate. _


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## Sean K (2 September 2009)

Still can't underestimate the importance of the US right now. Chindia can't take over in 5 years so there is real short term risk that the world could go pear shapped.

My vision is that the US starts to fail between now and then, and also around about then there may be a confluence of socio-economic factors that draw the world to war. A really big fvck off war!!!

Whoever succeeds controls the worlds resources, and their economy will win.

Gee I hope we are on the right team.

I think we are. 

The US military is WAY too powerful.


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## haunting (2 September 2009)

This is how we should regard the USA-China relationship (extracted from DBS report):



> _As far as Asia is concerned, equities in US and China are important in two regards ”” US for stability, China for growth. With the strength of the second half recovery in doubt over China seeking to cool robust lending in its banking sector,_




** US for stability and China for growth. There are many factors behind such argument.. for example: the actual size of each economy where the US is still many times of the Chinese', the aging  population and the proportion of young people in each country, the declining in rate of consumption in the USA vs the increasing rate in China, etc...

But the most important factor behind the equity rallies thus far is the abundant liquidity injected into the global system due to QE by the US+EU - the ebb-flow of this liquidity is behind the recent equity market rallies in my view. Thus far, the fundamentals behind the US rally in my view is very weak to say the least. 

But at some point, the perception that the  US$ and US market are safe havens will turn stale and that's when and where the outflow of such liquidity will push the Asian+Australian market higher. With this view, the current correction should be seen as an opportunity to buy and position for growth, with China+Asia as the ultimate market/region of such liquidity and growth.

The time to act should be driven either by time or by event depending on your investment horizon. Time, I would target sometimes near the end of the calendar year to early 2010; or event,  if/when the xjo index retests the 4100 support and possibly the subsequent lower 35-3700 level.

With regard to war, I think the USA is too weak at this moment to wage any war. Its resources are too depleted and the US population at this stage too war-fatigued that I doubt if any war cry  by any politician will get any support at all. (Just try recalling how long it took the USA to wage another major war after their defeat in Vietnam - ended in 1975,  with Gulf War began in 1990 - that's a lapse of 15 years!)


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## Sean K (2 September 2009)

I completely disagree with the US war fatigue comment.

If they had the motivation, the US could wipe out the entire planet by themselves.

I think most lay people underestimate the US war machine. 

Their capability is mindblowing, and NO country or region could match them for many many years. 

One carrier group could take out China. Right now. 

They have 11 of them. 

I am backing the US for the next 5 years AT LEAST before I change teams. 

After 5 years, I start eating more rice.


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## haunting (2 September 2009)

First they have to get the motivation to want to wage a war - that's the key! Before reaching that point, a question that needs to be asked first is why would they want to wage another war, with Afghan and Iraq still unfinished? What's the objective?


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