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Chinese data showed that it ended 2009 with
record monthly imports of crude oil and soybeans and a strong appetite for iron
ore and copper. Chinese exports soared 17.7% vs a forecast for a 4$ rise. China also
zapped emerging markets with an announcement that it would raise reserve
requirements for banks a half percent to 16% by Jan. 18. Fears that other
developing countries would follow suit hit stock markets.
With exquisite bad timing, IFM Investment Ltd, a residential real estate brokerage from
Beijing, will
come to market via an IPO this week as NYSE.CTC.
From Michael Kurtz at Macquarie
Securities, some warnings for 2010 partly based on these numbers. He
does not expect tightening by central banks soon (not until H2 or even 2011)
and worries about trade battles:
“We expect broadly supportive Asian equity
market conditions to persist in 2010, and believe that getting the ‘currency
call’ and the ‘inflation call’ right will be key to superior investment
returns. Recent market focus on 2010 as a year of ‘tightening’ is overdone,
given that policymakers in key capitals continue to express concern about the
fragility of recoveries and seem willing to accept inflation to
promote growth and employment. The now-prevalent sense that US dollar
downside will be contained by a stark improvement in US data may prove [too] hopeful.
Rather, persistent dollar softness should sustain the relative attractions of
non-US assets, and keep global commodity, energy, and basic material prices supported
into H2 2010. Inflation, for its part, may not become a policy problem until
later in 2010 – and for much of the year could have market-supportive effects, e.g. by lowering real
interest rates and boosting pricing power.
“The likelihood of sluggish US and European
demand [recovery and] the combination of 10% US unemployment with 10% Chinese
GDP growth – particularly as key US midterm congressional elections loom – is
setting the stage for new protectionist flare-ups that will present additional
headwinds for Asia’s export-sector stocks. Meanwhile, outstanding risks
illustrated by recent market flash-points in Dubai and Greece point to ongoing
fragility that will incline global central banks toward easier money as an
insurance policy. The latter also suggests that where policy tightening does come first in many cases, it will be
on the fiscal rather than monetary front.
“The persistence of reflationary policies
globally and a shallow US
demand recovery should ensure that for Asian stocks, H1 2010 will be more like
H2 2009 than different. In our view, monetary ‘exit strategies’ may only have a
greater impact after mid-year, when inflation starts to take on a more
troublesome tone – by which point markets will have to discount 2011 growth
drags from the scaling-back of government spending.”
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