China – The Ox has arrived…….

Hang Seng (12.579)  Shanghai B (124)  USD/CNY (6,84)

Again very interesting with China mainland ending last week higher and Hang Seng dropping further. Hang Seng is a fair picture of the global movements. The domestic investors might have bought stocks at the Chinese year end with the expectation that the year of the Ox will be better than the year of the Rat.

With the Chinese Lunar New Year celebrations going on for some days, the financial markets will be closed. The days are normally good for retail sales, though it should be priced in the market.

Some statistical data from last week is worth to use in the big picture.

The sales of condominiums to private individuals went significant up in December compared to November. One company reported a jump of 57% in sold living space month-on-month, but for the same company the total sales in 2008 were down 9%. Other development companies reported even higher increase in their December sales numbers.

The rise in sales has a reason – mainly rebates. It seems to be around 7 – 10% on the price but some developers have paid for the interior construction and maybe even delivered a car together with the condo as well.

Data from the National Development and Reform Commission showed that property prices fell with an average of 0,5% from November to December in the 70 main cities of China. Most negative for new buildings in Shenzen (-18,1%) and Guangzhou (-9,4%), both numbers are yearly changes. It’s unclear if these numbers include all types of real estate.

The jump in private households buying condos in December might explain some of the credit growth in December, which is a healthy component in the credit growth. Overall are the news not encouraging – if prices on property continues down, then we all know it is a true headwind for the government that hopes on a domestic demand boost.

The GDP numbers released Thursday last week confirmed a slower growth which isn’t a surprise. Due to the way data is collected and presented by the National Bureau of Statistics the discussion is about if we get the full picture.

Apparently a government economist said before the release of the GDP figures, that the actual number should be below 6,0% but would be reported as above (that part was right as it was 6,8% growth). Some economists also think that the first part with below 6,0% is right. This view is supported by much lower factory output, power generation and activity indices that all in all suggest an even lower GDP number.

I keep the targets for the Chinese stock markets. Hang Seng is moving in the right direction but China mainland stocks are holding well, which I observe closely.

The year of the Ox will be very difficult with a lot of state support already priced in the market. The Ox symbolizes patience, hard work and tenacity – quite a good picture of what is needed……..

Targets: Hang Seng 11.000     Shanghai B 90

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