Few were expecting to marry China with the words “Bull Market” at any point this year, but that is how the media now describes it (see TOP on Bloomberg news yesterday). While the H-shares have risen more than 20% since March, the domestic index, the SHCOMP has lagged but it too is now starting to rally. This has always been a very good indicator of sentiment, the future direction of policy, sustained equity demand and of broad market performance. Remember this is ACTIVE DEMAND from DOMESTIC investors. Not indexing, not short covering, but real demand.
More positives in support of banking and property sectors today:
- Shanghai Securities News is today reporting Banks in Shanghai, Beijing and Guangzhou may accelerate their mortgage approval and disbursement process, shortening to 1 month, from 3 months.
- Bad Banks: Anhui Daily is reporting the China Regulator is to allow local governments in Shanghai, Guanghdong, Zhejiang, Jiangsu and Anhui to set up “Bad-Loan Managers” to acquire bad loans from financial institutions.
- China has authorised developer debt sales (bond issuance) for the first time in 5 years – avoiding defaults, avoiding the shadow/trust market and reducing the cost of financing while giving the ability to better control, define and delineate economic risks.
- Shaanxi Province City of Xi’An (population 8.5m) becomes the latest City to ease property curbs.
Despite its recent 16% rally, the listed Chinese property market remains at just 6X FY1 PE, a 28% discount to the warranted levels seen during the last property cycle despite being in a significantly better (operational) position this time around in terms of elasticity of demand (just a 5% ASP cut from listed developers saw sales rise 25% YoY). That’s even before stimulatory policies were announced.
Stay long the property supply chain… the miners, in Europe: Anglo American, Norsk Hydro, Rio Tinto/BHP Billiton, Glencore, and in the US: AA and FCX.
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