Jpmorgan China Growth & ... Share Discussion Threads

[loganair] 22/8/2023 05:29

China remains underwhelming:

To be sure, there aren't many obvious reasons for the rot to stop other than the bearishness may be overdone in the short-term - the MSCI Asia ex-Japan index is down eight days in a row, its longest losing streak since January 2020, and China's blue chip index has fallen nine of the last 11 sessions.

The flow of economic data and policy actions out of China remains underwhelming. The latest figures show land sales revenues for the government fell for a 19th straight month and overall fiscal revenue growth slowed in July.

Foreigners sold Chinese stocks for the 11th day in a row on Monday, dumping nearly $1 billion via the Stock Connect, and reaction to the central bank cutting the one-year loan prime rate by 10 basis points and leaving the five-year rate unchanged was one of overwhelming disappointment.

The spread between Chinese and U.S. 10-year bonds widened to 180 basis points on Monday, the biggest gap since January 2007 and a growing source of severe downward pressure on the yuan.

State-owned banks are actively supporting the offshore yuan, sources say. If the yuan continues to fall, however, speculation is sure to mount that more direct FX intervention could follow from Beijing via the sale of U.S. Treasury bonds.

[loganair] 16/8/2023 14:28

For several years I've been posting that China will continue to gently and slowly reduce their US Treasury holdings, however will not do much until they reduce them to between $700bln to $800bln before making their real move, what ever this move is going to be.

China continues to reduce its holdings of US Treasury's...

Jun - $835.4bln
May - $846.7bln
Jan - $859.4bln

2022:

Nov - $870.0bln
Oct - $877.8bln
Sep - $933.6bln
Aug - $971.8bln


To think just 1 year ago China held $296bln more US treasuries than the No.3 holder UK, today its down to $163bln.

In June, the countries with the biggest increase in their U.S. Treasury holdings are U.K., Canada, France and Germany - all servant countries of the U.S. .

The biggest decrease being Hong Kong, Singapore and Saudi Arabia.

[christo21] 16/8/2023 13:31

China is a mess, economic data weak. Not a great time to own Chinese equities. But the companies in JCGI are awesome, Baba and Tencent are china's Apple and Amazon. They'll recover after to ATH', just have to wait for this to play out

[loganair] 16/8/2023 08:00

The word 'crisis' should always be used responsibly and judiciously when covering financial markets, business and economics, but are we at that point now with China?

Developments in the last 24 hours from the world's second largest economy - another string of top-tier data 'misses', a shock interest rate cut and an abrupt announcement that (record high) youth unemployment data will no longer be published - suggest we might be.

[loganair] 14/8/2023 16:45

One of China’s largest private wealth managers has triggered fresh anxiety about the health of the country’s shadow banking industry after missing payments on multiple high-yield investment products.



The turmoil at Zhongzhi Enterprise Group Co., a secretive financial conglomerate that manages about 1 trillion yuan ($138 billion), surged to the fore after several of its corporate clients disclosed overdue payments by a trust unit. In a sign that Chinese authorities are worried about potential contagion, the banking regulator has set up a task force to examine risks at Zhongzhi, according to people familiar with the matter.

While little known outside China, Zhongzhi is among the biggest players in the country’s $2.9 trillion trust industry, which combines characteristics of commercial and investment banking, private equity and wealth management. Firms in the sector pool savings from wealthy households and corporate clients to offer loans and invest in real estate, stocks, bonds and commodities.

One of the nation’s largest developers, Country Garden Holdings Co., is on the brink of default, while loans extended by Chinese banks fell to the lowest level since 2009 last month in a sign of waning demand from businesses and consumers. Zhongzhi’s trust unit bought stakes in real estate projects last year, betting on a market rebound that has so far failed to materialize.

Chinese stocks slumped on Monday, with the CSI 300 Index falling for the fifth time in six sessions, and the yuan depreciated toward its weakest level this year. While markets took some solace from news of the Zhongzhi task force, analysts at JPMorgan Chase & Co. warned that the turmoil may contribute to a “vicious cycle” for real estate financing in China.

“The biggest problem now is how to isolate the risks associated with Zhongzhi group so that it doesn’t cause confidence of the entire trust industry to collapse,” said Shen Meng, a director with Beijing-based Chanson & Co. “If the situation continues to worsen, expect the scale of the risks to be no less than when a leading property developer defaults.”

A total of 106 trust products worth 44 billion yuan defaulted this year through July 31, according to data provider Use Trust. Real estate investments accounted for 74% by value.

Three firms said late Friday they failed to receive payments on products issued by companies linked to Zhongzhi, including Zhongrong International Trust.

Zhongzhi is the second-largest shareholder of Zhongrong Trust, with its ownership at around 33%. The conglomerate also holds stakes in five other licensed financial firms, including a mutual fund manager and two insurers, and invested in five asset management companies and four wealth units, according to its website. It also controls listed companies and owns 4.5 billion tons of coal reserves among its industrial operations.

Zhongrong Trust alone has 270 products totaling 39.5 billion yuan due this year, Use Trust data showed. The average yield on those products amounted to 6.88%, compared with the benchmark 1.5% one-year deposit rate paid by banks.

The prolonged slump in China’s property sector has brought previously sound property developers to their knees. The sector is caught in a vicious cycle where failing developers put homebuyers off purchases, which then crimps cash flow of companies. Home sales tumbled the most in a year in July.

The missed payments show “how the real estate’s liquidity problem can create a domino effect on other sectors, including the trust industry,” said Gary Ng, senior economist at Natixis. “It would not be surprising to see more trusts with a high asset allocation towards real estate face payment issues.”

Nacity Property Service Co. and KBC Corp. first announced news of the delayed payments by Zhongrong International Trust in statements Friday evening. KBC, a carbon products manufacturer, said in a statement to the Shanghai Stock Exchange that the delayed payments were tied to 60 million yuan invested with Zhongrong Trust.

Another listed company said on Friday that payments on one wealth product it bought from a Zhongzhi unit had become overdue this month and it will take legal measures to recover investment losses.

Zhongrong Trust, which managed 786 billion yuan in assets as of Dec. 31, said its businesses faced a “relatively high level” of credit risks in 2022 as counterparties’; liquidity pressures and refinancing difficulties eroded their ability to honor payments, according to its annual report for the year.

Real estate accounted for 11% of Zhongrong Trust’s trust assets, following 42% in industries and 33% in financial institutions, according to its annual report. The company was previously fined 200,000 yuan by regulators for investing in a property project that lacked relevant approvals, and pledged to improve compliance.

Trust firms, including Zhongrong Trust and MinMetals Trust Co., have bought stakes in at least 10 real estate projects last year, betting that unfinished homes will eventually yield cash to pay off some of the $230 billion in property-backed funds they have issued to investors.

[loganair] 10/8/2023 07:17

Renewed tension between the United States and China could be back on investors' radar, with the White House detailing plans to prohibit some U.S. investments in Chinese technology, and requiring that the government be notified of other investments.

[loganair] 09/8/2023 13:45

That's why I posted 'Circa' could be a little higher or lower, nobody could ever be certain of the final low or high for and share price.

[spooky] 09/8/2023 11:07

I wasn't dismissing the trajectory, purely the apparently arbitrary selection of 150.

[loganair] 09/8/2023 10:31

spooky - With the news I've been posting in my opinion very tangible reasons why I firmly believe if patient will be able to pick up shares in JCGI for circa 150p

[spooky] 09/8/2023 08:53

Is that based on anything tangible other than wetting your finger and sticking it in the air?

[loganair] 09/8/2023 08:22

I've heard that the Chinese authorities are becoming increasingly worried that their economy is slipping into what happen in Japan in the 1980's/1990's.

I still believe if very patient investors will be able to pick up shares in this trust for circa 150p.

[loganair] 08/8/2023 07:10

Chinese factory activity fell for a fourth straight month in July, further depressing the outlook for growth and increasing pressure on Beijing to inject substantial stimulus. The services and construction sectors are also teetering on the brink of contraction.

Citi's Chinese economic surprises index remains deeply negative, but has crept up off its lows recently. At -54.7, it is at its 'highest' level since June 30, but will soon be heading lower again if Tuesday's trade data disappoint.

[loganair] 24/7/2023 06:41

It's a different story in China - the economy and markets are badly underperforming, growth forecasts are being slashed, and the big danger is deflation, not inflation.

The central bank has been reluctant to ease policy because the already weak yuan could come under even greater selling pressure, so investors are pinning their hopes on a fiscal boost from Beijing. And it will have to be a significant boost.

Measures announced on Friday to help boost sales of cars and electronics failed to impress investors, and foreigners are steering clear of China's financial assets even though they are relatively cheap.

But the economic, financial, political and social challenges Beijing faces are such that Chinese stocks can get even cheaper before foreign investors start buying again en masse.

[loganair] 23/7/2023 11:56

For several years I've been posting that China will continue to gently and slowly reduce their US Treasury holdings, however will not do much until they reduce them to between $700bln to $800bln before making their real move, what ever this move is going to be.

China continues to reduce its holdings of US Treasury's...


May - $846.7bln
Jan - $859.4bln

2022:

Nov - $870.0bln
Oct - $877.8bln
Sep - $933.6bln
Aug - $971.8bln

[loganair] 19/7/2023 08:04

The Chinese economy's sluggishness is even raising the prospect that China may be entering an era of much slower economic growth, and may never get rich.

Whether it chugs ahead at 3% to 4% annually or flirts with Japan-like "lost decades" of stagnation, it looks set to disappoint its leaders, its youth and much of the world.

More immediately, the whole gamut of U.S.-China tensions is back on investors' radar - climate, defense and security, and semiconductors and tech.

[loganair] 18/7/2023 07:07

China casts shadow over global markets:

Chinese stocks fell almost 1% on Monday, their biggest loss in three weeks and dragging the broader MSCI Asia ex-Japan index into the red for the first time in six sessions.

The shadow over local markets cast by China's second quarter GDP data on Monday is unlikely to lift completely by Tuesday, and the pressure on policymakers in Beijing to deliver more stimulus to shore up activity will surely increase.

Chinese GDP grew 0.8% in April-June from the previous quarter, beating the consensus forecast of 0.5%. But on a year-on-year basis, GDP expanded 6.3%, well below the 7.3% forecast.

JPMorgan, Morgan Stanley and Citigroup trimmed China's growth forecast for 2023 to as low as 5%, with Morgan Stanley also trimming its 2024 GDP forecast by 40 basis point to 4.5%.

[loganair] 17/7/2023 16:59

For info - The falling USD = the market is anticipating the following:

1. An end to the Fed hiking interest rates.
2. Recession in the United States.
3. Deflation in the United States.

[loganair] 16/7/2023 16:56

China offers other countries to be rich and secure, like Singapore so these countries can buy the stuff China makes while all the United States offers countries is instability and lectures these countries on how they should run themselves.

In the medium to long term this is very positive for China and their economy and very negative for the United States and their economy including the USD.

[loganair] 15/7/2023 07:32

Y-o-Y for the month of June U.S. Imports from China fell 23.7% and European imports from China fell 12.9%.

Y-o-Y export from China fell 12.4% overall, some of the worse numbers in Chinese modern economic history.

[loganair] 13/7/2023 07:37

China does not want to be the same as Japan in 1989, therefore they are reducing debt in the property developers, doing enough so does not get out of control on the down side by allowing developers to finish projects they've already started, however not to start new ones.

RMB lending at its lowest level in 20 years, causing the Yuan to go down against the USD.

China managing the downside is not the same as to Stimulate.

[loganair] 11/7/2023 07:46

China into managed decline, quality of growth over quantity of growth.

China more and more dependant on external growth.

Chinese CPI now 0 (Zero) Y-o-Y - no inflation due to weak world demand.

Chinese PPI - 3 months of straight decline, 7 straight months of 0 (Zero) or below = declining world demand.

This shows in the opening stage of the world recession.

Haven't seen the worst of the deflationary pressure yet.

[loganair] 10/7/2023 06:57

Chinese banking stocks, measured by the Hong Kong-listed Hang Seng Mainland Banks Index <.HSMBI>, plunged 10.5% last week. That was the index's biggest fall in five years and third steepest since it was launched in 2011.

Reflecting just how poorly China's post-lockdown economy has performed relative to consensus forecasts, Citi's Chinese economic surprises index has now fallen 11 weeks in a row. That's the longest stretch of underperformance since 2010.

U.S. Treasury Secretary Janet Yellen's four-day visit to China concluded on Sunday with no obvious thawing of relations between the two superpowers. Yellen said her talks with Chinese officials were "direct" and "productive" but they have "significant disagreements".

[loganair] 29/6/2023 07:51

On the macro front, another plunge in Chinese industrial profits was yet another reminder of the difficulties the world's second largest economy is experiencing. Annual profits at China's industrial firms extended a double-digit decline in the first five months as softening demand squeezed margins.

The economy appears to be losing steam on many fronts. Further monetary easing could be in the cards and if it is, the yuan is likely to inch closer to a fresh 15 and a half year low through 7.30 per dollar.

Investors are wondering exactly where Beijing stands on the yuan right now, after acting to support the currency for the first time in nearly eight months on Tuesday, then allowing it to slide again on Wednesday.