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Double Whammy China PMI Misses Spark Sell-Side Demands For More Stimulus
A record-breaking surge in monthly credit creation and a trillion Yuan of QE-lite was enough to provide a glimmer of hope into the tumbling Chinese economy for one or maybe two months but with the real estate market continuing to free-fall, it should be no surprise that China's PMIs finally catch down to the erstwhile reality simmering under the surface in the ultimate centrally-planned economy. China's official government PMI dropped from 30-month highs, missed expectations and the early month flash print, to less exuberant 51.1 reading (with Steel industry new orders totally collapsing) with both medium- and small-companies printing contractionary sub-50 levels. Then (after Japan's PMI beat - of course it did as hard data crashes worst on record), HSBC China PMI also missed, printing a slightly expansionary 50.2 Showing, as BofA warns "the two PMIs both show that the current recovery is relatively weak and choppy..." and RBS adds "we expect the government to interpret such an outlook as challenging its growth target and to take more, and more significant, measures to support growth."
As Goldman writes,
August official PMI tends to be biased on the upside. Since the data started in 2005, this is the second time it fell in August (first time was August 2012). The degree of seasonality probably has been reduced in recent years but may still exist. This suggests underlying slowdown might be more meaningful, which is consistent with the weak reading of the HSBC PMI.
Almost all components showed signs of cyclical slowdown, which indicates the evidence of an incremental slowdown is conclusive. Among them the new orders and production sub-indexes are particularly important because unlike the headline readings they do not lag mom IP and have a closer fit with mom IP readings. Both fell meaningfully in August. In terms of drivers of weaker orders, export orders fell less than overall orders but the difference was not large.
We believe this weakening reflects less supportive policy stance since July and possibly less supportive underlying exports growth. Gradual deceleration from strong sequential growth in June is consistent with our forecasts, though there is risk of a steeper deceleration if policy and monetary/credit conditions don't ease meaningfully from the July stance. We are still on track to reach the 7.3% GDP forecast for 3Q and the whole year though the risks are largely balanced instead of clearly tilted towards the upside.
Small- and Medium-Sized companies are both in contraction...
* * *
This catastrophic miss by 0.1 points immediately saw Markit's economist proclaim more stimulus was needed and BofA's China-watchers calling for a fresh round of stimulus... or else...
China's NBS manufacturing PMI slowed to 51.1 in August from 51.7 in July. The reading is slightly below the consensus forecast at 51.2, and is in line with the drop of the HSBC flash PMI to 50.3 in August from 51.7 in July. The main drags leading to the decline were output and new orders which fell to 53.2 and 52.5 in August from 54.2 and 52.5 in July respectively. Today's reading confirmed the weakness of the economy and the softening momentum. But since the new leadership is determined to deliver stable growth during their period of power consolidation, especially in the run up to the 4th Plenum in October, we believe Beijing will step up its mini-stimulus in coming weeks. We maintain our 7.4% growth forecast for both 3Q and 4Q.
Why did growth slow down again?
As we explained in our 2H preview, there are three types of headwinds in 2H: the high base effect, the anti-corruption campaign and the downturn in the property sector. The anti-corruption campaign, though definitely positive for growth in the long-term, has hit the economy in the short term. The campaign also made the central government's stimulus effort less effective as local government officials are not incentivized to speed up fiscal spending and investment projects.
A fresh round of stimulus
The Chinese government last week announced a fresh round of mini-stimulus to counter the downward pressure on growth. These measures include an RMB20bn PBoC relending with preferential rate to the agriculture sector, a push for ramping up investment in clean energy and public facilities such as hospitals, nursing homes and fitness centers, and a promise for delivering the target on social housing and more spending on environmental protection.
China’s third-quarter growth tends to be slower, and the level of lending in August will be “very critical” for the economy, Liu said.
“We expect the government to interpret such an outlook as challenging its growth target and to take more, and more significant, measures to support growth,” Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, said in a note today.
* * *
As a gentle reminder, nothing about China's credit crisis has improved from a year ago... in fact it's only got worse and more fragile as now, asset prices are falling too.
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Bullish as a mother fucker.
Should be good for TSLA +20 Tuesday at the open.
Elsewhere:
(Apparently false) London terror rumor spreads across social media
http://tinyurl.com/pwddp4q
Ho Li Fuk
Bullish!
i found my new catchphrase: "Bullish as a mother fucker"
feel assured that I will complete every retort with this pithy summary of world conditions.
'did you hear about all the celebrities who had their phones hacked an nudy photos leaked?' "Bullish as a mother fucker!"
Hey there motherfuckers!
Is Asia sliding?...some casual observations.
Fuck I’ve been busy….Just got back from several business trips around Asia (Singapore, Hong Kong, Thailand, Philippines, Malaysia etc) meeting people in the Healthcare System; Healthcare is a great indicator of ‘Standard Of Living Expectations’. Health Systems around Asia, particularly the Private entities, are in full swing with future projects being looked at right now.
Let me tell you, Mainland Chinese are spending money hand-over-fist! They’re cruising around with wheeled suitcases as big as they can get away with (overhead lockers) and stuffing them full of Chanel, Hermes, Louis Vuitton, Rolex, Cartier, Baby Formula…whatever! I saw a Chinese kid and his girlfriend buying his & her Cartier Watches in HK, and he wasn’t leaving the store unless he’s $40k lighter. I saw groups of Chinese women with magazines for catalogues and full or writing…I presume they’re buying for friends back home as well as themselves. The Chinese are causing flight delays all the time, especially at HK Airport as they’re in Duty Free while everyone else is boarding. When it comes to Bling, the Chinese are putting Western greed for shame. The Chinese have an insatiable appetite for top shelf stuff, and I did see a single Chinese haggle on price.
My gut feeling is that the average Chinese person whom can afford to travel (not the rice farmer), is going into debt at a thousand miles an hour. Sure, they have multi-generational wealth piled into a housing bubble, but, I still cannot convince myself that-that wealth is being spent on seasonal fashion bling...without doubt, they're racking up the debt, and this could well be a knock-on affect of lose monetary policy in China over the past 7-10 years.
Although the touristy beach places are still down somewhat, Bangkok is pumping pretty well. The Thai Army (Coup) has given Russian mafia their arching orders and given 2017 to get out. Also, little things like beach vendors must be registered and display serial numbered vests. This tells me the Thai want their tourist industry back….
In the major shopping centres in Bangkok there are many Developers selling apartments in beach towns like Pattaya to Chinese, and the sales tables are FULL of Chinese investors.
So, the PMI print may well be down, but the Chinese are cranking up the money velocity both in China and especially outside China.
If you can find a niche market in Asia, something they either NEED, or, want BADLY, then go for it. I’m planning on taking several product solutions across Asia over the coming few years at least.
Back home I’m seeing a particularly worrying trend. There seems to be a void opening up in regards to Skill/Knowledge/Quality/Experience in my competitors. That’s great for me, but it’s across the board. I put it down to the Baby Boomers departing the space and younger generations not having the skillset/experience/drive to take up the challenge. I just bagged some pretty serious Government contracts, without competition, and completely circumventing the Tendering Process.
PS. Got hacked in HK. Apples’ tech cell in Ireland (iTunes) reckons it was from a Mainland China entity and they got me through the Hotels’ WiFi.
Hey TSP, good to see you around.
Hey TP. Thanks. hope you're well.
More....
The number of Westerners in Thailand (and other countries) is quite low with respect to years gone by, but I did see a lot of younger Mediterranean people (Gen Y tards with Tatts and shit). But the real answer to the question of Chinese money and where it's going isn’t just in the numbers, it’s in the expenditures! The amount of money the Chinese are spending on food while on holiday is staggering; nothing less than Lobster and Crab will do. Tiger Prawns are…fill. Also, in the major shopping centres in Bangkok there are many Developers selling apartments in beach towns like Pattaya to Chinese, and the sales tables are FULL of Chinese investors.
TSP Hit Prediction: Every civilisation has its’ French Riviera. A place to buy a Condo and visit twice a year, to get-away. Hawaii, Bahamas, Canary Islands, Greece, Spain, Bali (for the piss-heads), Rio, etc.
But where will the Chinese have their French Riviera???
ANS: IMO, Thailand!
Thailand has beaches, great food, great shopping and is very close to China. Do the math!
The same thing is noticeable here in Sydney. Drove around the Central Park development the other day, where 1 bedroom apartments sold for 800k each, saw a 19-year-old chinese kid driving a 300k Lambo. Had a chat to the building manager and he said it is a pretty common sight.
It seems China is succeding in moving from a production to a financial consumption growth model. I fail to arrive at any conclusion with regards to how long this game can go on.
With regards to what you said about your competitors. The bastadisation of standards have been driven from the top-down. The MBA's in charge concluded, erroneously in my opinion, that it is more profitable to run a business on the cheap with poor-quality workforce than investing in order beat your competitors. I agree with you that it offers interesting opportunities to more agile players.
70% of Eastern Adelaide (the expensive areas) were Chinese buyers over the last 12 months.
Yeah I hear ya. My company philosophy is 'Keep It Lean'. Also, will I ever employ an Aussie kid? I doubt it. Most are only good for partying, glassing, king hitting, balcony surfing and putting in leave applications….there are some exceptions, but they move from one job to the next searching for more pay.
i would have 'taken your word for it' on the whole story had you not misused the term 'whom.'
1st thing that pops into my head when i read/hear that is "this dumbass." not that i think you're a dumbass, but for me it's a great indicator of ppl who are trying too hard.
sorry, i mean no offense, just the grammar nazi in me.
Fuck-me, I'm not writing a book here
Now I don't mean to be a grammar nazi myself, and I could be mistaken, BUT, a Mother Fucker is someone who fucks mothers, whereas a Motherfucker is a vulgar term.
In your previous post, “i found my new catchphrase: "Bullish as a mother fucker", are you referring to a person who fucks mothers, or are you using a vulgar term, in which case you’ve accidentally includes a space?
http://www.oxforddictionaries.com/definition/english/motherfucker?q=mother+fucker
Everything, well, almost everything is Hecho en China. I was in that mega store, 'Garden Center' [that is now changing its name to 'The Home Decor Store' and checked on the source of 102 items. Only 2 ... ONLY TWO ... were not made in China; they were the slow moving black janitor and the pimply white sales kid. Those two were the only items I found not Hecho en China. All other 100 items I examined were imported from the PRC.
My stint at the corporate world is at an end. I cannot stomach the idiocy of it anymore. It looks like an adult daycare. It seems people spent 80% of their time trying to get away with not doing any work, including feigning concerns with other people's job quality as long as it prevents them from having to do anything.
Company I work for is letting go of 120 people, about 40% of the local workforce. They are expecting those of us who are staying to "pick up the slack", however the ROI on my time does not add up, so I am looking for the door.
Geez, that's rough, and I reckon you're right, that's what I see too.
I'm of the opinion that it’s the Entrepreneurs and Start-Ups which will have their day in the sun from here-on. Many Companies with high overheads seem to be clinging on to some notion that things will change however, the last three months for me have shown otherwise. It’s time to sell into Asia, not just buy from it.
I saw a large number of opportunities, but for me, just two stood-out begging to be explored. Luckily for me, the products I need are already created or have only just been debugged and awaiting distributors to push them into the marketplace.
And the layoffs are just starting. The large-cap businesses are only surviving because of ZIRP.
HP for example just reported a 270million net LOSS, in Australia alone. I know a lot is to do with tax-dodging, but those are not healthy numbers.
Grim.
TSP,
Don't know who the fuck you are. I just acquired commercial land in the Philippines. It's worth 6 million in their currency. USD$ 135,000.
Stop being deceitful by randomly throwing out high spending consumer numbers without providing the currency ratio.
"being deceitful by randomly throwing out high spending consumer numbers without providing the currency ratio"
Menopause must be a real bitch!
My values were in USD, Princess
No they're not you lying sack of shit. Mrs Atomizer just returned from China, Twain, and the Philippines..
She hasn't hit her menopause stage. Impossible for me since I have a big dick.
I see my banking statements, you are claiming falsehoods on the lack of providing correct currency conversion.
Why don't you just tell them Zimbabwe is a recovering hot spot and has become the top three emerging markets to invest in. Fucking scumbag..
"Mrs Atomizer"....is 'she' your left or right hand?
I can see you have a "big dick", but that's nothing to brag about when it's hanging from your forehead.
And where the fuck is "Twain" you cantankerous senile old motherfucker?
Can someone hand me the insect repellent; there's something in the forum.
Little
late there hoss.
TSP, here in Thailand on the beach side Pattaya . What you say is true they love high end and stuff. Allegedly there are 40,000 condominiums coming to fruition in the next 2 to 3 years. I live in a six-year-old building which is only maybe 15 to 20% occupied. It's brand-new gorgeous with a beautiful view of the ocean. $600 a month.
Not maybe they can money print enough money to buy 40,000 condos here in Thailand near my hometown. But I don't think the demand level is here. Especially with the world slowdown. What say you?
Pachanguero, I say...hang in there. I believe that Thailand will catch-on with the Chinese. Which is great for the tourism side of the Thai economy but the mainland Chinese are unbelievably fucking rude. The trick is to make money from them but keep your distance at the same time. For the record, I just checked my trip pics and the Condos they were selling were the Centric Sea development in Pattaya, but I'm sure there's dozens more on the go, and hundreds more to come.
Myself, I'd invest in bangkok itself but not the beachside cities/towns. Like I said, the beach towns are still struggling, even though the Thai economy (GDP) is up around 4%.
I say saturated.
TSP, here in Thailand on the beach side Pattaya . What you say is true they love high end and stuff. Allegedly there are 40,000 condominiums coming to fruition in the next 2 to 3 years. I live in a six-year-old building which is only maybe 15 to 20% occupied. It's brand-new gorgeous with a beautiful view of the ocean. $600 a month.
Not maybe they can money print enough money to buy 40,000 condos here in Thailand near my hometown. But I don't think the demand level is here. Especially with the world slowdown. What say you?
Luxurious sex vacations....Hmmm...No money no honey..Youre buying at or near the cyclical peak,imo.
...Close down the UN and Nato...World Leaders should settle everything on the Golf Course...
Its not particularly inspiring imo.
Worst results in the last 15 minutes! Minute over minute decrease!
"As a gentle reminder, nothing about China's credit crisis has improved from a year ago... in fact it's only got worse and more fragile as now, asset prices are falling too."
As another gentle reminder, none of this matters for markets that are controlled by central bankers. I understand why ZH wants to occasionally run a story about markets and not just conservative click baiting tripe, but I need a magnifying glass to see the point in the first chart.
since when has ZH been anything but click-baiting 'the apocalypse is coming' chart porn and such?
bear in mind i've only been reading a few months, so i'm probably jaded.
Trust me. It was better, once.
I like to dip my cock into ice cream cones.
You can't save this place all by yourself.
Trust me. It was better, once.
Yeah? When?
ZH should be renamed: Confirmation Bias Central
Perhaps in a sense. But back in the day, ZH presented contrarian viewpoint that was not a mainsream conservative point of view (which is only contrarian if you believe in the Teams). Now, it's just another Faux news of the internet, complete with links to Drudge articles about global warming and Obama's suit color.
Then again, it's all about money, isn't it. Tylers. Fight club my ass. I now see why Tylers use a Hollywood image of Fight Club as their avatar. Brad Pitt ain't Fight Club, but he does personify ZH.
Go ahead and cancel my account new Tylers. His name was Tyler Durden.
Hi Lola, my name is Harb and I still love you.
At least you're not NSA, so you've got that going for you.
And you've got my ice cream glazed cock going for you.
Do you like gladiator movies?
Only greased ones.
Now that was a funny-ass thread. LOL!
As long as you repeat the same prediction, one day you may get lucky. Nothing goes up forever.
Australia’s luck runs out as China slows By Henny Sender (FT)
There is only one good reason not to short the Aussie dollar: it is expensive. But the grounds for taking a bearish view on both the currency and the country become more compelling by the day.
As China gradually both slows and shifts underpinned by urban services, there will be less demand for Australia’s resources. “Almost all economic figures released so far this year were weaker than consensus,” China research from HSBC noted on March 21. “China’s manufacturing sector is losing momentum.”
The growth in industrial production slowed to the lowest reading in nearly five years for the first two months of 2014, according to HSBC.
http://www.ft.com/cms/s/0/3c8da5ea-b34e-11e3-b09d-00144feabdc0.html#axzz...
Do not worry. Prime Minister Abbott has plans in place-war plans. At the rate he's going, Australian troops will be laying siege to both Moscow and Damascus by Christmas.
And You thought America was a warmonger.
I was training for the Persian Gulf War 20-24mths BEFORE Saddam Insane invaded Kuwait (Aug 1990).
Hard to believe? Well, the ABCA (America, Brittain, Canada and Australia....which later became the Coalition Of The Willing) were involved in 'Exercise Caltrop Force' (Mar 1989) a full 16mths ahead of the Kuwait invasion. This was to 'test interoperability' well ahead of any Western Military involvement, and what would later become the coalition forces.
If you care to dig down, you'll see all manner of weapons development preceeding the Persian Gulf War by many years. A classic example was the 'Silver Bullet' (Depleaded Uranium armour piercing [discarding sabbot] munitions), and the M1A2, perfect for a Middle Eastern War.
I don't think Abbotts' smoke and mirror kiddies game works on people who've been around the block.
Short Australia, buy gold.
Now if the yuan debases does not the usd and euro strengthen? How can just every body devalue with no downside? Politicians and economists are more dangerous than isis.
This is so bullish that when the shorts cover it's good for 300 points on the upside. Everything is candy canes and unicorns!
More stimulus? Thier last 'stimulus' was more then 3x their GDP. How much more of a Bubble do they want?
I wonder how much longer that usd/cny carry is going to last? I think we're in for some major volatility, as volume ramps up next week.
Fonz was really smart about 2-3 months ago, when he mentioned the levered short yuan trade.
The PBoC is backed into a corner. If they print, inflation takes over. If they don't, that massive "short" carry trade gets NUKED.
question Yen,
why would PBoC worry about the carry trade shorts getting nuked?
Same corner all central bankers are in.
In the modern centrally planned world of central banks, bad news is good news as stimulus is expected and good news is bad news on expectations of rising interest rates and withdrawal from the cocaine of stimulus. The world is upside down.
Best of luck to you professional investors.
Bamm!
Tuesday, July 29th, 2014
UPS profits have been dented by the restructuring of its healthcare programme, as earnings per share dropped 57% in the second quarter of the year.
http://postandparcel.info/62073/news/companies/ups-profits-down-57-after...
Global news is all uber-bullish!
This won't help housing: Chinese Baby Gets Leukemia After 15 Days in New Home; New Chinese House More Dangerous Than Chernobyl
Hey, how come the People's Bank don't get to make up numbers -- both good and bad -- just like the Fed?
Didn't the Fed tell us that a 3rd Quarter GDP looked like a 3.5%? Then 3 monts later it turned out to be 2.2%, nobody cared and the market went up.
Fuck, the Chinese can do that too.
The Fed don't have property rights on being crooks.
I'll be at the HSBC headquarters in Shanghai later this week. Anyone have any messages they want to pass along?
Sell yuan, buy gored.
Aso not good: Systematic Fraud and Corruption in Land Sales Threatens Economy
Their top priority is to mute social unrests and all stimuli shall be to ease collapses in sectors that can cause massive unemployments. Their focus is not on growth as the G has already propagated to the People to give up the GNP chase. Regional Govts are largely impotent as they are further pull back to the Center.
A tricky road ahead to soft land by managing gradual deflation.
In this centrally planned economy, domestic interest rate does not matter with with stimuli to only sensitive sectors. RMB shall be kept artificially low to ensure the declining export machine does not implode.
It is a different ball game where the Capital Markets structure is not in place to transmit Monetary Policy measures.