Re: Birchtree's account talk
I can hardly believe that import prices were 1.9% above year-ago levels - not much inflation being imported. The kick may come this month if oil doesn't crater back to $70 - which I think it will. And what about that trade deficit - stabilizing in the second quarter at $190.8 billion - about 5.5% of the nation's output - down slightly from $197.1 billion in the first quarter as sales of U.S. exports grew. I don't think a recession is in the cards. I saw a Chinese couple buying a Hovnanian home on TV during their sale for cash. Who from the euro-zone is here buying everything on the cheap? Worry about the Donkey coming to power and not about economic growth.
DAI YUNPING has never travelled far from his home. But next month he will indulge in a week-long tour of South-East Asia to the tune of $US6500 ($7700). Upon his return, Dai, 27, plans to move out of his parents' home and buy an apartment in the old French Concession area.
Where is the money coming from? Not from his family, nor his $US650-a-month salary job as a trade merchandiser. Over the past three years Dai has made more than $US200,000 on the stockmarket - and now he is starting to live it up.
"I don't hesitate any more to go to expensive restaurants," Dai said on a recent afternoon as he checked his accounts at a packed trading hall, a case containing a new $US1600 Hewlett-Packard laptop slung over his shoulder.
Stockmarkets around the world have been wobbling amid turmoil in the US subprime mortgage industry and increasing worries about a possible economic downturn in the US. China's stockmarket has bounced up and down, too, but it has mostly gone in one direction. The benchmark Shanghai composite index has climbed more than 350 per cent since the start of last year.
On Monday, in what has been a common pattern, the Shanghai index rose 1.5 per cent, even though every other stockmarket in Asia fell in the wake of the unexpectedly weak US employment report that rattled Wall Street. It closed the week at 5327, up 33 points from its close the previous Friday.
Analysts point out that China's stockmarket marches to its own beat. It is virtually closed to foreign investors, yet money is gushing in from speculators, state-owned companies flush with foreign reserves and savings-rich Chinese citizens who have limited investment options.
Nowadays in China stock investors are busy counting - and spending - their profits, producing the first signs of an emerging wealth effect, a term that describes how consumption rises as investors see the value of their stock portfolios increase.
Leo Wong, general manager of Shanghai's Bentley dealership, is one beneficiary. This year Wong's shop has been selling 10 Bentleys a month, for about $US400,000 each on average, double the number of sales last year. Wong figures half his buyers stepped up to a Bentley because of surging stock profits.
Managers of high-end restaurants and boutiques also say they have seen an increase in business in recent months. So have tour operators such as China International Travel Service, whose managers were stunned to see how quickly their new 12-day Mediterranean Sea cruise, at $US4000 a person, sold out this northern summer.
"I know the stockmarket is boosting our overseas travel sales," said Zhao Dexiang, the company's deputy general manager. Many of his customers, he said, belonged to a travel club in which they had talked about "wanting to take their families to more luxurious trips because they made quite a lot of money from the stockmarket."
Economists say it is almost impossible to measure the wealth effect in China, because of a lack of reliable statistics. Most doubt the effect is very big at the moment, given that the boom in equities has benefited only a sliver of society.
More than 100 million stock trading accounts are registered with the Shanghai and Shenzhen exchanges, but most of the investors hold dual accounts and many accounts have little or no money in them, according to experts and government reports.
Still, a significant number of people in cities such as Shanghai have a direct stake in the stockmarket, and the ranks of small investors are swelling as elderly and other working-class people, being fed up with paltry returns from banks and hearing stories about neighbours getting rich, are buying stocks individually or pouring money into institutional funds.
Retail spending in China has accelerated in recent months, growing at an annual rate of about 16 per cent. The gains reflect higher wages and food prices. But it is also likely that rising stock and home prices have helped boost consumer confidence.
In the northern spring, when the Shanghai composite index was climbing towards 4000, the Chinese stockmarket was full of investor apprehension and warnings of a bubble. Senior government officials, including the Premier Wen Jiabao, and state-controlled newspapers spoke about the dangers of irrational optimism and risks to common people. In late May Beijing suddenly tripled the stock trading tax, sending the Shanghai market tumbling 15 per cent over several days and inciting anger among investors who chided the Government for its heavy-handed ways.
Since then, as the index has shot past 5300, there has been hardly a word from Beijing about the heady market.
"There's no news from the Government, because they know it would not be very effective," said Liang Weipei, an independent stock analyst in Shenzhen.
Ordinary investors and analysts alike now believe that the Government would not dare do anything rash before the National Congress in mid-October, lest it foment unrest and embarrass Government leaders. In fact, many people are betting that China's stocks will stay red hot until at least the Olympics next August.
Government officials have more than political security at stake. Analysts say it is likely that a large amount of money that is flowing into the stockmarket is from government agencies and state-owned institutions. Chinese insurance companies, for example, are generating a substantial chunk of their earnings from investment returns.
"Why would they want to spoil their own party?" said Fraser Howie, a financial analyst and co-author of Privatising China: The Stock Markets and Their Role in Corporate Reform.
Los Angeles Times
http://www.smh.com.au/news/business...snt-miss-a-beat/2007/09/14/1189276984133.html
