Posts Tagged ‘Asia’

China’s Bold Economic Policy Moves

Wednesday, October 29th, 2008

CLSA Asia-Pacific Markets, a division of Credit Lyonnais/Credit Agricole, are one of the best groups of analysts providing background on China.

Included here are excerpts from a report by CLSA’s macro strategist Andy Rothman regarding China’s recent decision to stimulate its housing sector.

Beijing is cutting mortgage rates to as low as 5.23 percent, reducing required down payments to buy a home from 30 percent to 20 percent for first-time buyers, comparatively still far above what most Americans have put up to purchase a house, and also lowering some taxes and fees.

CLSA views the government’s action as a move to get people to invest their wealth in real estate, which will serve to shrink an overbuilt housing inventory and help keep the broader economy from slowing down further.

“Beijing had succeeded in cooling off price growth, taking it from 25 percent year over year last fall to about zero year over year today. And, having achieved the objective of avoiding a bubble, the last thing the Communist Party wanted to do was crash the property market.

“(This week’s) policy changes will have two effects:

“First, they make home-buying more affordable, with a combination of lower interest rates, lower down payments and lower transaction fees.

“But the second effect is most important, as affordability has never been the big problem in China. (The) measures represent the government reversing its anti-property stance adopted one year ago. Back then, Beijing said, in effect, ‘we will do our best to depress prices and discourage home-buying.’ Consumers responded rationally by delaying purchases.

“Now, the government is saying, (my words), ‘we encourage home-buying and you should anticipate that property prices will start rising again.’

“With affordability good, household debt almost non-existent, and banks ready to lend (they are all controlled by the Party), homebuyers will return to the market in response to Beijing’s message.

“(The) move can be considered part of an overall effort to give a light stimulus to the economy, but in my view is primarily focused on the real estate sector. These changes also illustrate that the Party is capable of taking proactive steps to deal with a changing economic environment.”


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Governments Keep Making Mistakes: Jim Rogers

Wednesday, October 22nd, 2008

Jim Rogers, CEO, Rogers Holdings, appeared on CNBC’s European Squawk Box this morning with Geoff Cutmore, to discuss the progress of markets and his outlook.

Jim Rogers, CNBC, October 22, 2008

click image for video

Rogers stated that the economy is in for high inflation given the size and nature of the central bank interventions and injections in to the financial system, and pre-ambles this saying,

“The world is unfolding. The American government keeps making mistake after mistake after mistake. Other governments do too. Unfortunately this is going to be a mess,” Jim Rogers, CEO of Rogers Holdings said Wednesday.

“Bernanke, and Paulson and the guy at the NY Fed, Tim G-r-eithner [or whatever his name is: slips Rogers] have been wrong every week for the last two years. Why do you think they know what they’re doing?”

He has covered most of his “shorts,” and wishes that he had not yet covered them, as their has been more downside.

He is long short-term US government bonds and short and shorting long term government bonds as he believes that we are heading for inflation. He has been buying agricultural commodities, though he admits that his timing is bad, as they are down.

“I bought some more agriculture earlier this week and it promptly went down. The fundamentals for commodities and agriculture have not changed,” says Rogers. “What’s happening in the world right now means that there will be less supply of everything coming out of this, and nobody can get a loan for a new zinc mine or a loan to increase their crop production.”

Rogers adds that

“What’s happening now is that we are in a period of forced liquidation; we’ve had 8 or 10 of these in the last 100-150 years; 1929 in the US, 1974 in the UK…We’ve had these before. The things that come out on the other side have always been the things that are unimpaired. The US financial system is impaired. The investment banking system is impaired.”

“But, commodities and agriculture are totally unimpaired by all of this. If history’s any guide, the things to buy will be the things that are doing fine; water treatment in Asia [for example], agriculture’s gonna do fine; that’s what you should buy.” Rogers adds, “However, my timing’s not very good.”

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke should resign for keeping alive “zombie banks” that should be allowed to fail, he said.

The Japanese government refused to let financial institutions fail in the 1990s, Rogers said.

“It’s 18 years later and their stock market is 75 or 80 percent below what it was 18 years ago,” he added.

Rogers also said that interest-rate cuts are coming.

“I know we are going to get aggressive rate cuts everywhere, that’s why I’m long short-term government bonds in the U.S., but shorting long-term government bonds because it’s not going to help, it’s going to add to inflation.”



Source: CNBC


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Jeff Rubin: The Age of Scarcity (04/24/08)

Wednesday, April 30th, 2008

April 30, 2008 - CIBC World Markets Chief Strategist, Jeff Rubin, says that Oil will eventually reach $150/barrel in 2010 and over $200/barrel by 2012. He cites among the leading reasons, the advent of cheap cars from India and China, or rather Tatas and Cherys, that will enable millions of middle class Asians who couldn’t previously afford a car, to do so, Take these developments and place them agaisnt the backdrop of peak oil and a decline in oil exports from key suppliers, Saudi Arabia, Russia and Kuwait, and we are in the midst of a long term supply/demand imbalance. Here are couple of excerpts:

Whether we are already at the peak in world oil production remains to be seen, but it is increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity.

Our latest review of probable supply suggests oil production will hardly grow at all, with average daily production between now and 2012 rising by barely more than a million barrels per day (see pages 4-7). Despite the recent record jump in oil prices, the outlook suggests that oil prices will continue to rise steadily over the next five years, almost doubling from current levels.

While global oil supply is not growing, global gasoline demand is, and will continue to grow as cheap cars from Tata and Chery dramatically cut barriers to car ownership in the developing world. Millions of new households will suddenly have straws to start sucking at the world’s rapidly shrinking oil reserves.

Car purchases in Russia, for example, are exploding as US sales stagnate (Chart 2), while in India the advent of the Tata Nano, a car that will sell for as little as US$2,500 will allow millions of households in the developing world to own automobiles when they otherwise could not. It is the savings necessary to buy a car, not the price of gasoline that poses the greatest obstacle to fuel demand growth in those countries. But between rapidly rising domestic incomes and rapidly falling car prices, that obstacle is becoming more and more surmountable.

To read the complete report, click here:

StrategEcon: The Age of Scarcity, CIBC World Markets, April 24, 2008

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