Category: China & HK

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China’s Low-Wage Export Engine Starts to Sputter – China Real Time Report – WSJ

UBS Economist Jonathan Anderson: Beijing has relied on super-low wages to win a bigger slice of global exports…….But for the past 24 months….China’s share of low-end light manufacturing imports into the U.S. and European Union “has peaked” at around 50% of those markets. In the U.S. market, Vietnam, Bangladesh, Indonesia and Mexico are picking up market share at China’s expense. In the EU, it’s those Asian nations along with Poland, the Czech Republic and Hungary.

via China’s Low-Wage Export Engine Starts to Sputter – China Real Time Report – WSJ.

Look for growth in these markets: Vietnam, Bangladesh(?), Indonesia, Mexico, Poland, the Czech Republic and Hungary.

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Chinese manufacturing index rises but export outlook dips | The Australian

Exports were a problem area during the month, as the official survey’s new export orders subindex fell to 48.3 from 50.4 in July, slipping into contractionary territory for the first time since April 2009.

Economists said the weak exports reading could be an ominous sign for the export-dependent economy.

“It is a sign that China was affected by turbulent global markets in August,” said Standard Chartered economist Li Wei.

via Chinese manufacturing index rises but export outlook dips | The Australian.

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Shanghai Composite confirms down-trend

The Shanghai Composite Index respected resistance at 2650, confirming the primary down-trend. Expect a test of 2350. 13-Week Twiggs Money Flow reversal below zero would warn of rising selling pressure. In the long term, failure of support at 2350 would offer a target of 1600*.

Shanghai Composite Index

* Target calculation: 2400 – ( 3200 – 2400 ) = 1600

Monday’s long tail on the Hang Seng Index and higher volume indicate short-term support at 19000. Expect a rally to test the recent high at 20500.

Hang Seng Index

* Target calculation: 19000 – ( 22000 – 19000 ) = 16000

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China commits to down-trend

The Dow Jones Shanghai Index reversed below primary support at 328, confirming the primary down-trend signal from the Shanghai Composite Index. The 21-day Momentum peak barely above zero strengthens the bear signal.

Dow Jones Shanghai Index

* Target calculation: 330 – ( 360 – 330 ) = 300

Dow Jones HongKong Index broke short-term support at 415, indicating a down-swing to its 2010 low at 365. The longer-term 63-day Momentum below zero strengthens the bear signal.

Dow Jones HongKong Index

* Target calculation: 415 – ( 445 – 415 ) = 385

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Whack-a-Mole: IMF Not Impressed With China Bubble Management – WSJ

[IMF China mission chief Nigel] Chalk argues that China faces a potent cocktail of ingredients pushing house prices up:

  • High domestic savings, and limited opportunities to take cash offshore
  • Limited domestic savings options and bank deposit rates below the rate of inflation
  • No property tax or capital gains tax, which makes it cheap to buy and hold property
  • Rapid growth, high wages and urbanization, which mean real demand continues to grow

The government’s crackdown on high housing prices has had some success. But Chalk believes that the restrictions on speculators introduced so far treat the symptoms, not the causes, of the malaise.

via Whack-a-Mole: IMF Not Impressed With China Bubble Management – China Real Time Report – WSJ.

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Behind its lectures, China is a sinner, too – FT.com

The main point is that China’s debt burden is far higher than it likes to admit, and much of that debt has piled up in the past few years, as a result of Beijing’s response to the global financial crisis.

“Even though headline sovereign debt levels are low in China, so much quasi-sovereign activity happens through the banking system that if you include some of those contingent liabilities, the number can get very big,” says Charlene Chu, head of Fitch’s China Bank Ratings.

“People forget that China undertook its fiscal stimulus package through the banking system rather than by issuing public debt in the way that other countries did.”

via Behind its lectures, China is a sinner, too – FT.com.

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China Momentum v. Money Flow

The Shanghai Composite displays a similar bullish divergence on 21-day Twiggs Money Flow to the DJ Shanghai Index. Follow-through above 2660 is likely, but resistance at 2820 is expected to hold.

Shanghai Composite Index

* Target calculation: 2600 – ( 2800 – 2600 ) = 2400

The Hang Seng Index shows a similar (Twiggs Money Flow) bullish divergence to the Shanghai Composite, but both display a sharp fall on 63-day Momentum below zero, warning of a primary down-trend. Expect a rally to test resistance at 21500, but the bear market will continue.

Hang Seng Index

* Target calculation: 19500 – ( 21500 – 19500 ) = 17500

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China bucks the trend

Despite the global bear market, Dow Jones Shanghai Index rallied above resistance at 330, with bullish divergence on 21-day Twiggs Money Flow indicating buying pressure. Expect a test of 360. In the long term, breakout above 360 would signal reversal to an up-trend.

Dow Jones Shanghai Index

* Target calculation: 330 – ( 360 – 330 ) = 300

Dow Jones HongKong Index displays a similar bullish divergence on 21-day Twiggs Money Flow, indicating buying pressure. Resistance at 450 is unlikely to hold, leading to a re-test of 480.

Dow Jones HongKong Index

* Target calculation: 450 – ( 480 – 450 ) = 420

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