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Adam Carr of ICAP Australia weighs in with some macro-commentary related to the above:
If you look at the data flows, you can’t help but conclude the global recovery is doing a lot better than official rhetoric would suggest. It started in Japan when machine orders (lead indictor for industrial production) surged 10% after a 9% increase the month prior. In China, exports and imports continue to surge, while new loans rose and forex reserves hit a new record. Jump over to Europe and
we see there are fewer Britons unemployed (7.7% from 7.8%) and that euro zone industrial production is powering ahead, rising 1% m/m or 8% annually.
Now apart from the Chinese data, about September, this is all August data. What it’s telling us is that Q3 isn’t looking like it will be markedly weaker than Q2. Remember (and despite the rhetoric) the undeniable reality is that global growth was strong across the board in Q2 (including the US) and driven by private demand – not inventories or public spending – but consumers and businesses. Q3 may not be as strong as Q2, where we saw record rates of growth in some cases, but it ain’t lookin’ bad.
This is why markets can rally when the Fed tells us growth isn’t satisfactory. Punters know that in no way shape or form is growth that pathetic. The fact that equities and commodities can still rally tells us this. The Fed’s money printing actions will only serve to add fuel to the fire – to weaken the dollar.
Euro and Yen were little changed. While we are on the Yen I had to laugh at comments made by Japan’s Prime Minister. He suggested that Korea and China had to act responsibly on exchange rates, [adding] that individual efforts to debase currencies had no place in the G20. I’m serious, he said that.
Unfortunately this only serves to highlight why punters can’t take policy makers seriously – in Japan, the US, or the UK. It wasn’t even a month ago that Japan was directly intervening in $-Yen and the PM comes up with that little gem! Admittedly it is no worse than what we are seeing from the Fed/Geithner. I can’t help but wonder, having said this stuff, whether they then sit around and laugh about it with their mates? Or are they serious in the belief they’ve just won the world over; mesmerising everybody with the strength of their argument and ‘clever’ rhetoric?
Meanwhile, on the yuan, Capitol Hill has an ally. “We have been saying for years that the currency was undervalued” said Dominique Strauss-Kahn, managing director of the International Monetary Fund. He added that China would have to revalue the yuan in order for the country’s economy to reduce its reliance on foreign export markets. China should act to raise the value of its currency “the sooner the better”.
Strauss-Kahn told the BBC that there were signs that countries were trying to use their currencies “as a weapon”. “The willingness of the countries to work together, which was very strong at the climax of the [financial] crisis is not as strong today,”. ‘Currency war’ might be too strong, but the fact that countries want to find domestic solutions to a global problem is really a threat to the recovery.
Chinese initial public offerings are rising in number but not in capital raised. Some recent examples: Shanghai retailer Mecox Lane, MCOX, raising $100mn, with Credit Suissse; Haidian eduational tech firm Global Education & Technology Group, GEDU, raising $66.9 mn, also with CS; Wanzhou chip equipment-maker Daqo New Energy Corp., raising $76 mn, with Morgan Stanley. We reported earlier in disbelief about Country Style Cooking Restaurant Chain, CCSC, raising $82.5 mn to open a chain of Chinese restaurants in China, which both Fei Chen and I thought made no sense. Then Internet consolidator China Cache, CCIH, raised $100 mn. These mini-ipo’s are almost guaranteed to pop post-ipo producing a gain for the underwriters (who get a 15% over-allotment to make more money), but the funding the issuer itself gets is pretty puny.
It can work the other way. The paperwork on the largest recent Chinese ipo, for China Ming Yang Wind Power Group, MY neglected to mention that a cheaper wind power ipo was taking place in Hong Kong at the same time. Then, my oh my, MY won not one contract for four offshore wind farms in bidding run by the Chinese govt. The share has now blown down.
More on financial services, drug, oil, windpower, and fertilizer stocks follows.
