The Boom Seems Like A Distant Memory
A report from the New Zealand Herald. “The latest QV.co.nz E-Valuer statistics show only 10 of Auckland’s 167 suburbs have homes with a median value under $500,000. The number of suburbs that have hit an average $1m mark has jumped from 43 to 50 in just two months. Real Estate Institute of New Zealand chief executive Colleen Milne said there were still opportunities for first-time buyers but they had to move quickly. ‘These properties are quickly sought out,’ Milne said.”
The Sunshine Coast Daily in Australia. “A prominent Gatton real estate agent has labelled the new ‘investment property’ rate unveiled in the new Lockyer Valley Regional Council budget as unfair and unnesessary. John Boyd, principal of LJ Hooker Gatton, precicted the decision to post a 20% extra rate levy on investment properties would see rents rise almost immediately. ‘The rise will not, and can not, be absorbed by landlords as most rentals are negatively geared and the owners of investment properties are having to find additional funds to make their mortgage payment,’ Mr Boyd said.”
The Globe and Mail in Canada. “Fort McMurray’s housing market is weakening. Real estate prices are slumping, vacancy rates soaring and rents dropping. The boom seems like a distant memory after crude-oil prices plunged by half over the past year, triggering widespread layoffs in the oil sands. The local resale housing sector is looking wobbly as some owners begin feeling the economic pinch. In the Wood Buffalo area, the price of all types of properties sold on the Multiple Listing Service will average $544,000 this year, down 9 per cent from $597,626 last year, according to a forecast by CMHC.”
“Stephanie Swain, an administrator who has switched her career path to pipe fitting, is thinking about moving back to Nova Scotia with her husband, a veteran pipe fitter. ‘Things are bad in Fort Mac,’ she said, referring to growing unemployment.”
Live Mint on India. “The real estate market has been among the sectors worst hit by the economic downturn. Debt-laden developers in the country’s key property markets—Mumbai, Bengaluru, Chennai and the National Capital Region (NCR centred on Delhi)—have been struggling with slow sales, high unsold inventory, delayed construction and stalled projects. There are no signs, yet, of things getting better.”
“Following the collapse of Lehman Brothers Holdings Inc. in September 2008 and the ensuing global financial crisis that froze credit markets, India’s property market went into a tailspin. Yet, by late 2009, the sector started getting back on its feet. This time around, the slump has endured a lot longer.”
“‘The big difference between the two slowdown cycles of then and now is that today, it is a buyers’ sentiment issue. Developers have more access to different sources of capital now but customers just don’t want to buy,’ said Ashwinder Raj Singh, chief executive of residential services at the Indian arm of property advisory Jones Lang LaSalle Inc.”
ABC News on China. “Wu Xiaoya knows the rough and tumble of Chinese stock markets all too well. As an undergraduate student, Ms Wu lost money when the stock bubble burst in 2007 because she did not cash out in time. The same thing happened this time when the shares she bought on the Shanghai stock exchange plunged in June. This time the stakes were higher because Ms Wu had borrowed a significant amount of money from brokerages to gamble in the market.”
“‘The [Communist] Party wants to use the market to cause some reform in the real economy,’ she said. ‘I didn’t sell at the first sign of trouble because I thought the Party would never let the market fall since it would be disastrous for them and the country. But I was forced by the brokerage to sell because I had borrowed on margin. I was just too greedy.’”
“Regulators are reportedly taking their investigations of alleged short selling overseas while scarred investors, such as Wu Xiaoya, turn their thoughts to bread and butter issues. They are worried about what the future holds because it will not be easy to make the money back in a cooling economy. ‘The economic environment will be very tough over the next few years,’ said Ms Wu. ‘The people I know don’t have much money left. It’s the shareholders of listed companies, the sons and daughters of officials and wealthy businessmen who are wealthy. Your average person really doesn’t have much left at all.’”
From CNBC. “Perhaps the biggest indicator of the magnitude of China’s slowdown can be found in the global commodities market. The true message of plunging commodity markets is that the Chinese government wasted $20 trillion worth of credit digging holes to mollify the fallout from the Great Recession of 2007, primarily creating a huge fixed-asset bubble with little economic viability. And then it forced another $1.2 trillion in margin debt to engender a consumption-based economy, primarily by creating a stock-market bubble after the fixed-asset bubble strategy began to fail miserably.”
“As China tries to balance the demise of its equity bubble while still keeping the illusion of free markets intact, two delusional narratives have started to circulate around Wall Street. The first such Wall Street-inspired delusion is that the collapsing Shanghai stock market will have no effect on the underlying Chinese economy. The second fallacy is that Wall Street believes in the TV commercial that claims what happens in Las Vegas stays in Vegas. Or, in this case, what happens to the Chinese economy stays in China. But the truth is that the meltdown in China is already spreading all around the Asia-Pacific region.”
‘If there’s one thing China-watchers of all stripes tend to agree on, it’s an absolute certainty that the Communist Party leadership has few equals in the world in terms of sheer ability. Such administrative excellence is often put down to Chinese culture’s long-standing Confucian emphasis on the imperative of having a highly-educated elite at the helm of the ship of state.’
‘Others, echoing the distaste for democratic government of Aristotle and Plato, see the Communist dictatorship’s ability to place facile public opinion on the back burner as its great strength, allowing it to think long term in a way the parliamentary West can only dream of. While the lunacy of Maoism may have forced this competent cultural ethos underground, with the advent of Deng Xiaoping’s reforms in 1979, China’s capable, elitist, imperial culture has simply reasserted itself in its modern guise.’
‘The problem with all this is that it resembles a comforting bedtime story more than anything else. After all the ghouls and goblins unleashed by the Lehman crisis of 2008, largely discrediting a gormless West, surely it’s a comfort for serious investors to know that at least the grown-ups still run things in Beijing?’
‘Yet after watching the Chinese authorities bumble around in the wake of their country’s recent stock market corrections, a simple – if heretical – thought kept occurring to me: what if these guys are simply not as smart as we are all assuming them to be?’
‘The real worry in all this is not the garden-variety correction that was going on, but rather Beijing’s hysterical attempts to stop the whole process, in the face of obviously overvalued shares, as though the sea can indefinitely be held back from the shore (I thought King Canute had sorted this out).’
‘But perhaps more importantly, it calls into basic question the vaunted competence that the Communist leadership is supposed to possess. The good news and the bad news are the same thing here: perhaps the West is not outclassed by China’s leaders.’
This guy is at the CFR. Boy, it must be a real head scratcher for these globalists to realize the Chinese leaders are a bunch of yahoos.
Here’s some ‘vaunted competence’ for you:
‘Many solar power plants and wind farms have been abandoned in western China over the first half of this year despite the country’s growing solar and wind energy capacity, reports Yicai, the website of Shanghai’s China Business News.’
‘Newly-installed wind energy feeding the grid in China reached 9.16 million kilowatts and wind energy that wind farms sell to energy companies surged 20.7% to reach 97.7 billion kilowatts. However, the amount of wind energy wasted also increased 15.2%, 6.8% higher than the same period last year.’
‘Energy was wasted mostly in north and northwestern China. Jilin abandoned 43%, or 2.29 billion kilowatts, of wind energy over the first half of this year, followed by Gansu at 31%, Xinjiang Uygur autonomous region at 28.8% and western Inner Mongolia at 20%.’
‘A former worker of Goldwind, the second largest wind turbine manufacturer in China, said the percentage of wind energy abandoned in north, northwest and northeast China has been high since the number of newly-built wind farms far outpaced the construction of new grid structures.’
‘Yicai said wasted solar energy may occur in central and western China since investments in solar projects in the region are still increasing, local development remains unbalanced and supply exceeds demand.’
Teaching and educating how to make money isn’t high on the priority list of central planners. A mind for mercantilism is an enemy of the state….. in China and here.
The land of massive ghost investments built on a foundation of sinking debt.
Here’s some ‘vaunted competence’ for you:
We had a company move into town that made the 300-ft tapered steel towers for Wind Power sites located along the Columbia river. However the industry was dependent on green energy subsidies and trade tariff protection from China and Vietnam. Poof…they folded like a bed-sheet back in 2012 when the subsidies ended.
“katana summit-wind towers” <— query
Not just a member of the CFR, but a “life member,” which brings to mind another illusion, which is that the West’s alleged experts, who often are ensconced in very comfortable sinecures, are competent, can discern facts, and can draw correct conclusions from those facts.
I’ve never ascribed any sort of rare or unique ability to Chinese political leadership. They do appear to treat the country’s people and environment as totally disposable, and that gives them a comparative advantage in areas that range from manufacturing to ideologically-driven mass dislocation, imprisonment, and death. This is a country where all policy blunders are amplified grotesquely. The Great Leap Forward and the Cultural Revolution are the template, not some kind of Confucian technocratic genius.
We have a highly-educated elite running our ship of state and financial sector too. They aren’t doing a good job. “Capable elitism”? Not in China and not here either. Nobody is outclassing anybody at the moment.
The problem is that our elites are highly educated, but not wise (or humble or curious).
Wisdom involves learning from one’s own mistakes. And the mistakes of others. Right now, even admitting a mistake, much less learning from it, is perceived as unpatriotic and weak.
as i said years ago what if someone like me was in the inner circle of say Hillary when she was a senator and forced her to read this blog everyday back in 06-07…would things have been any different?
Riding around dc in black suburbans.
Ellen transported like royalty
“…the Communist Party leadership has few equals in the world in terms of sheer ability.”
“Ability… don’t last.” —Marsellus Wallace
“The second fallacy is that Wall Street believes in the TV commercial that claims what happens in Las Vegas stays in Vegas. Or, in this case, what happens to the Chinese economy stays in China. But the truth is that the meltdown in China is already spreading all around the Asia-Pacific region.”
Don’t forget about contagion effects on countries that export raw materials that fueled China’s construction boom, including Canada, Australia, Russia, Norway, and Middle East oil producers, to name a few.
Is the lag so long that it is not effecting prices in Aus, Nz and Canada
It is affecting prices in Aus, NZ and Canada. Even here in the US.
This is just the tip of the iceberg.
‘Perth’s median house price has taken its biggest tumble in nearly two years. Figures show the median house price fell by $20,000 or 3.6 per cent in the June quarter to $530,000.’
‘The median price for Perth units, villas, apartments and townhouses also fell from $440,000 to $420,000. In regional WA, the median house price fell $10,000 to $380,000, while apartments dropped by about $4,500 to $325,000.
‘REIWA President David Airey said the fall in Perth’s house price was much larger than expected. “We knew prices were under pressure but, certainly across the real estate business, no-one expected the drop would be this significant,” he said. “That clearly shows that, with the big drop in the number of sales, there’s got to be some consumer sentiment around that and I suspect in Western Australia it’s very much to do with our poor, slow economy in the local market.”
‘Prospective tenants were also spoilt for choice with more than 8,100 rental properties sitting empty. He expected the completion of new apartment buildings to see even more rental properties come on board in the near future; however, he also expected rental prices to stabilise.’
‘As for people wanting to put their home on the market, Mr Airey urged sellers to focus on presentation and ensure the property was correctly priced.’
You want some poof? Here’s some poof for ya’!
‘Why is Isaac Plains relevant? Well, in 2011 at the height of the Australian mining boom, Japanese conglomerate Sumitomo thought it has spotted a bargain, and a SMH reports, it approached Tony Poli, the founder of mid-tier miner Aquila Resources with an offer: it would buy its 50% stake in Isaac Plains, at the time Aquila’s only producing coal mine, for $430 million.’
‘Market participants thought Aquila’s stake might fetch $300 million at best but Sumitomo was confident it would make a strong return, and offered almost 50% above fair value, especially since Brazil’s legendary mining company Vale owned the other 50% stake.’
‘Net, the total value of the Isaac Plains coal mine in 2011 was just about $630 million.’
‘It turns out Sumitomo was very, very wrong, and within a few years the writing was on the wall. In September 2014, Sumitomo and Vale shuttered the mine citing the downturn in the international coal market. Sumitomo said it would also take a writedown worth ¥30 billion ($11 million) on its Australian coal investments.’
‘And as SMH tongue in cheekly adds, Isaac Plains was added to the long list of coal mines up for sale – but at a price. That price was finally revealed on Thursday: the princely sum of $1.’
‘Why the complete collapse in price of the coal mine? Simple: blame China.’
‘The first half of the year has seen a dramatic fall in household comfort and a rise in financial anxiety. Australia’s deteriorating economic conditions are hurting households across all areas and metrics, and there is no obvious end in sight.’
‘That is the downbeat message from a comprehensive new investigation into the financial wellbeing of Australian households, by ME (formerly ME Bank).’
‘Perhaps of most significance to the economy was the sentiment around jobs. Self-employed people reported the biggest fall in comfort, plummeting 21 per cent. Full-time employees, meanwhile, recorded a 7 per cent drop.’
‘Fewer than half of full-time employees said it would be easy to find a new job if they lost their current one – a fall of 9 per cent.’
‘ME’s consulting economist Jeff Oughton told The New Daily that consumer’s are pretty much on the money. “The economy is still in third gear, below potential, and you’ve got the governor of the Reserve Bank saying economic growth might now be lower than what it used to be. Nominal income growth in Australia is very sluggish now because of the fall in commodity prices. And that’s what’s falling through into these very subdued household income growth.”
“And people are rightly being cautious. Because if commodity prices keep on falling and China keeps on slowing, the best days of income gains are behind you.”
‘Regarding commodity prices, Mr Oughton said there is not much the Australian government can do: we’re at the world’s mercy on that one. “This period of sluggish growth and weak labour market is likely to persist until the world gets going and commodity prices start to lift.”
‘That said, there are things that could be done to give the economy a kickstart: in particular, by increasing government expenditure on infrastructure. “We’ve got ourselves into a bit of a bind here at government levels. The governments know they could do with some infrastructure spending. There’s a long list of things that need to be done, but they’re arguing about who’s going to do it, and how it’s going to be funded.”
Just goes to show that Oz is really a third world nation (like New Zealand) and now that the commodities bubble has burst its is now more than obvious that the Emperor has no clothes. All those $100K+ per year mining jobs are going bye-bye.
Is margin lending to buy Chinese stocks under control now?
China state margin lender injects $32 bln into new mutual funds - China Sec Journal
SHANGHAI | Mon Aug 3, 2015 9:07pm EDT
SHANGHAI, Aug 4 (Reuters) - China Securities Finance Corp, the state margin lender tasked with stabilizing the stock market, has injected 200 billion yuan ($32.21 billion) since July into five newly-launched mutual funds, the official China Securities Journal reported on Tuesday.
The five funds, managed respectively by China Asset Management Co, Harvest Fund Management Co, China Southern Asset Management Co, China Merchants Fund Management Co and E Fund Management Co, each raised 40 billion yuan from CSFC, according to the newspaper.
CSFC is also managing a 120 billion yuan bailout fund formed by 21 brokerages, and last month provided 260 billion yuan in credit lines to brokerages to help them buy stocks via proprietary trading, after obtaining liquidity support from the central bank.
…
South China Morning Post
China stock markets ban same day margin lending in latest move to curb short selling
Celine Ge
PUBLISHED : Tuesday, 04 August, 2015, 5:42pm
UPDATED : Tuesday, 04 August, 2015, 7:26pm
New rule prohibits investors from borrowing and repaying stocks within the same trading day.
Photo: EPA
The central government has stepped up its efforts to reduce volatility in the stock market, with the two mainland bourses on Monday night imposing a ban on same day margin lending for short selling, while several leading brokerages said they would also suspend this type of trading.
The new rule prohibits investors from borrowing and repaying stocks within the same trading day, according to announcements on the websites of the Shanghai and Shenzhen stock exchanges. It was followed by statements by a number of the country’s biggest brokerages, including Citic Securities, that they would temporarily suspend short selling to comply with the rule changes and to control risks.
“They want to impose more stringent rules to make it harder for people to borrow money in an attempt to short sell stocks,” Louis Tse, director of VC Brokerage told the South China Morning Post. “There is always someone smart enough to find the regulatory loopholes and take advantage of them.”
The latest move marks another step by Beijing to crackdown on what it believes to be “malicious short selling” that allegedly contributed to the market turmoil, while the China Securities Regulatory Commission says it is targeting “automated trading” and “certain inter-market arbitrage trade” in its ongoing investigation into market manipulation.
Tse said the latest tightening move was linked to a probe by Beijing into automated trading, as regulators suspect some investors may have practiced high-frequency trading and distorted prices in the process. A total of 38 accounts have been frozen by Chinese securities regulators since last Friday due to “irregular trading,” “hedging” or automated trading that allegedly caused market volatility.
Short selling is a practice where investors sell shares they don’t own with the expectation that the price will fall so they can buy back the shares at a lower price. While short selling is commonly used as a trading strategy worldwide, it was singled out by Beijing as the cause of the prolonged mainland market rout.
…
The Wall Street Journal
Markets
Giant Hedge Fund Bridgewater Flips View on China: ‘No Safe Places to Invest’
Investment firm warns that recent stock gyrations will have broad, negative repercussions
Raymond Dalio of Bridgewater Associates sees trouble in China, adding to a growing chorus of high-profile investors who are challenging the long-held view that China’s rise will boost a host of investments.
Photo: Ruben Sprich/Reuters
By Rob Copeland and Mia Lamar
Updated July 22, 2015 9:14 p.m. ET
The world’s biggest hedge fund has turned on the world’s fastest-growing economy.
Bridgewater Associates LP, one of Wall Street’s more outspoken bulls on China, told investors this week that the country’s recent stock-market rout will likely have broad, far-reaching repercussions.
The fund’s executives once had been vocal advocates of China’s potential. But that was before panic in the country’s stock markets shaved a third of the value off Shanghai’s main index, battering hordes of mom-and-pop investors and hedge funds alike, before partially rebounding.
“Our views about China have changed,” Bridgewater’s billionaire founder, Raymond Dalio, wrote with colleagues in a note sent to clients earlier this week. “There are now no safe places to invest.”
Bridgewater, which has $169 billion under management, is renowned for its ability to navigate global economic trends—including the profit it turned in 2008, when most of its peers lost big. The company’s flagship fund reported its worst month in nearly a year in June, trimming its gains for 2015 to about 10%, a person familiar with the matter said.
A spokeswoman declined to elaborate on the fund’s changing views on China.
The move adds Mr. Dalio and Bridgewater to a growing chorus of high-profile investors who are challenging the long-held view that China’s rise will provide a ballast to a whole host of investments, from commodities to bonds to shares in multinational firms. For a generation, bets on China’s rising middle class have been commonplace on Wall Street and beyond as investors have looked to diversify their holdings.
But with the country’s stocks on a roller-coaster ride this summer, those beliefs are being tested. The world’s second-largest economy faces renewed questions about the sustainability of its growth and the government’s commitment to loosening its grip on the country’s heavily controlled markets.
Kingdon Capital Management LLC, a nearly $3 billion New York hedge-fund firm, told clients this week it had sold all its shares in Chinese companies listed on the Hong Kong exchange. It said it was spooked by the fallout from a surge in China in the use of borrowed money to purchase stocks, particularly after authorities cracked down on the practice, helping drag down Kingdon’s investments.
The firm said it would wait until the level of such borrowing in the market drops further before going in anew.
The shifts by Kingdon and Bridgewater follow a series of concerns raised publicly last week about China by other high-profile hedge-fund managers, including Elliott Management Corp. founder Paul Singer, Perry Capital LLC founder Richard Perry and Pershing Square Capital Management LP founder William Ackman. In China, few traders dare cross regulators by publicly expressing their concerns.
“It looks worse to me than 2007 in the United States,” Mr. Ackman said during an investment conference in New York, pointing to the unreliability of the government’s economic statistics. “Much worse.”
…
‘Under the “new normal,” the importance of growth speed is eclipsed by immensely complex structural reforms going on to transform the economy to one that relies more on the services sector, domestic spending and innovation.’
‘The government has put in place policies to contain fast expansion in credit growth, regulate borrowing by local governments and eliminate industrial overcapacity, which help lower investment in sectors such as real estate. At the same time, it has tried to put a floor on the slowdown, with limited but targeted support measures.’
‘Jinjiang used to be a manufacturing boomtown, a place making shoes and garments for American and European supermarket shelves. But these days, the city on China’s southeast coast, like many of its manufacturing bases, is losing its edge because of rising wages and lack of product innovation.’
“I’m considering moving to Bangladesh,” said Lin Genghuang, a Jinjiang native who owns a shoe factory. “Business is barely holding up here.”
Yes, the “immensely complex structural reforms”. Nah, I’m going back to Bangladesh.
‘When crude oil prices began to plummet, economists comforted Saskatchewan residents that their diversified economy would safeguard them during the oil and gas slump. In fact, Saskatchewan’s economy isn’t that diverse.’
‘The honeymoon is over for Saskatchewan’s housing boom. The Canadian Real Estate Association predicts house sales in Saskatchewan will decline by nearly 13 per cent this year.’
‘That’s both an indicator of low consumer confidence and an ominous sign for the construction industry. Housing starts in the first quarter of 2015 are half what they were three years ago. There’s already a glut of houses for sale in Regina and they’re overvalued, according to the Canada Mortgage and Housing Corporation.’
‘Cities that cater to the oilpatch have “Apartment For Rent” signs everywhere. The apartment vacancy rate in Estevan has spiked to 20 per cent, and vacancies in Lloydminster and Weyburn have increased fourfold to 11.6 and 8 per cent, respectively.’
‘While a glut of new condos has contributed to this, Canada Mortgage and Housing Corporation also attributes the changing rental market to fewer migrants. That is a worrisome trend, according to Rose Olfert, public policy analyst at the Johnson-Shoyama Graduate School in Saskatoon.’
“The rapidly growing economy was pulling in more and more people. The reversal of that will be an indication that the economy is slowing down and people leaving the province.”
‘In the first six months of 2015, the supply of apartments priced at around VND1 billion (US$46,000) each in Ho Chi Minh City was completely outperformed by those fetching over VND2 billion ($92,000) per unit. Nguyen Van Duc, deputy director of Vietnamese realty firm Dat Lanh, told news website VnExpress that more than 40,000 units were offered for sale in the first half.’
‘Among them, 80 percent – or around 32,000 units – have a common price ranging from VND27 million ($1,242) to VND40 million ($1,840) per square meter. With an average price of VND30 million ($1,380) per square meter and an average floor area of 70 square meters per apartment, each unit is worth around VND2.1 billion ($96,600).’
‘So with 32,000 units, the total value of all of the properties is around VND67 trillion ($3.08 billion).’
‘According to a report on the local realty market conducted by real estate service provider Savills Vietnam, the total supply of apartments in Ho Chi Minh City in the next 2-3 years can be up to 60,000 units, of which over 70 percent are mid-range and hi-end condominiums.’
‘ Good market liquidity, as announced by real estate businesses, is mainly triggered by those who buy as investment or to lease, real estate service providers said.’
‘Do Thu Hang, head of the research and consulting department of the Savills Hanoi business, told newswire VietNamNet that secondary investors and speculators outnumber homebuyers in many projects.’
‘This may affect prices, as when these secondary investors and speculators engage in buying and selling in the market, what they expect is that the price of their properties will rise, Hang said.’
‘Rapper 50 Cent says in a Connecticut bankruptcy court filing he spends $108,000 a month on his expenses, including $5,000 for gardening. He has a monthly income of $185,000, mainly from royalties and interest on his investments. But he’s paying $72,000 a month to maintain his suburban Hartford mansion.’
‘His album “Get Rich or Die Tryin’” helped make him one of the world’s best-selling artists. He’s due back in bankruptcy court Wednesday.’
I have a question about this number.
of course not one dime to educate black kids, to speak English and at least graduate high school, and not father kids they cant pay for…nope….not much giving back from any of the rappahz
‘A man surnamed Huang from China’s coastal Fujian province recently told Shanghai-based media outlet the Paper that although he has settled in Shanghai, he has been denied housing loans by banks in the municipality, though he does not know on what grounds.’
‘The Paper visited several banks and real estate agencies and found that “not granting loans to people from Fujian province” seems to have become an unwritten rule for some banks in Shanghai.’
‘Huang added that he recently applied for a loan of 2.54 million yuan (US$410,000) from a Shanghai branch of Industrial and Commercial Bank of China but was told a week later that his application had been denied.’
‘The bank told him the reason was that several entrepreneurs from Fujian entered the steel trade in Shanghai a few years ago and were later unable to repay their loans, leaving behind huge bad debts.’
‘The Paper then inquired with several real estate brokerage firms and received similar answers, citing the reason that Fujian traders in the steel trade defaulted in their loan payments a few years ago, greatly undermining the credibility of people from that province.’
‘One official of a state-owned bank in Shanghai told the Paper that the majority of banks in Shanghai are not granting loan requests from people from Fujian. When they see an ID number starting with 350–indicating that they are from Fujian–they almost always deny the request,” the official said, attributing the reason mainly to the fallout from the bad debts.’
‘China’s banking industry faces a tough road ahead, as they have seen rising non-performing loans (NPLs) and a climbing NPL ratio, with China Orient Asset Management Corp predicting the nation’s outstanding NPL’s will reach 1.13 trillion yuan (US$181 billion) by the end of this year, the Shanghai-based China Business News reports.’
‘According to Guangxi’s regulators, at the end of June, the autonomous region’s banks’ total assets and total debts reached 2.9 trillion yuan (US$460 billion) and 2.8 trillion yuan (US$446 billion), up 8.42% and 8.37%, respectively, compared with that of early 2015, with realized profits of 17.3 billion yuan (US$2.8 billion), down nearly 20% during the same period. In the first half of 2014, these banks had total profits of 21 billion yuan (US$3 billion), up 6.25% from the same period in 2013.’
‘At a time when profits were declining sharply in the first half, Guangxi’s banks’ NPLs had been rising quickly, reaching 34 billion yuan (US$5.45 billion) as of the end of June, up 40% compared with the end of January, with the NPL ratio rising 0.49 of a percentage point to 1.96% from end-January.’
‘April’s figures were even more serious. Since January, Guangxi’s banks’ NPLs and NPL ratio began rising, hitting 37 billion yuan (US$6 billion) and 2.17% at the end of April, up 53% and 0.7 of a percentage point, respectively, from the end of January. What’s worth noticing is that Guangxi regulators have yet to unveil the 2014 figures, and once they are, the situation could be even worse.’
‘Shanxi’s banks’ NPL had reached as high as 4.5% due to serious overcapacity in the coal and steel industries, said one unnamed senior executive at China Merchants Bank on June 19. Shanxi regulators have yet to unveil any related statistics.’
These Chinese bankers are so unsophisticated and unknowledgable about how to calculate a borrower’s creditworthiness and risk potential that, because some folks from one province (who were in the steel industry) defaulted on a bunch of loans, now they will deny, across the board, anyone from that province who comes in for a loan.
And these are the people who are going to take over the world.
‘A leading global independent investment strategist is predicting a decline in Australian banking stocks in the next few years. In his daily missive, “Downunder Daily”, Gerard Minack of Minack Advisers has warned the housing cycle in Australia appears to be peaking, a development that can have major implications for Australian banks and by extension, their performance on the stock exchange.’
‘The house price rally is starting to fray at the edges. As is well known, the price gains in this cycle have been led by Sydney — which partly reverses the price under-performance of Sydney in the prior cycle. Mr Minack says prices are already trending downwards with price declines becoming more common outside Sydney.’
“Apartment prices have fallen through this year in five of the eight capital cities; house prices are now falling in two capitals; and the pace of gains elsewhere (outside Sydney) are starting to slow,” he writes.’
‘Furthermore, with the mining industry already in sustained decline, a weakening housing sector will increase the risk of recession in 2016 in which case, the adverse effects of the housing decline can be sustained.’
‘Mr Minack’s views are echoed by Maple Brown Abbott chief investment officer Garth Rossler. Cited in The Sydney Morning Herald, Mr Rossler said historically low debt on banks’ balance sheets supported the view the big lenders’ share prices would do particularly badly during any potential recession.’
‘Additionally bank valuations are pretty stretched on earnings and that they are relatively high compared with the rest of the market.’
‘Adding further pressure on banks’ share prices was the announcement by the Australian Prudential Regulation Authority this month that banks would have to hold more capital to fund mortgages. In short, if the above sentiments hold true, the recent downward trend observed in the banking stocks could well be sustained for years to come.’
‘Dubliner Mella Moore arrived at her sister’s door in Sydney 10 years ago after embarking on an international diving tour and hasn’t looked back since. But last week she took a plunge of a different kind and bought a two-bedroom apartment in the city’s sought-after Bondi beach region…despite a nervousness about her recent purchase which she said was “expensive”.
“I am keeping my fingers crossed in relation to the Australian economy,” Moore (45) said. “I felt like I had to get on the ladder but I also think the Australian economy is more robust despite the concerns about property prices and commodities. There might be some parallels but I think the Australians are more careful here than at home, they are very conscious of cost. There might be a correction but not a crash,’ she added.’
‘Brian Whelan, a Perth-based estate agent, believes the Australian property market is an accident waiting to happen. Originally from Beaumont, Dublin, Whelan (30), gave up his job as a financial consultant in 2011 and moved to the southern hemisphere with his wife. “The average house price is now AUS$1m in Sydney and Melbourne is also too hot. There are tonnes of apartments on the market in Perth. There are warning signs everywhere,” he said.’
‘Property issues aside, then there’s the commodities market. With Australia at the end of a 24-year growth cycle, some investors believe recession is inevitable given the cyclical nature of economies. In fact, it is also generally accepted that commodity collapses predate recessions.’
‘Lay-offs and redundancies are now common in the mining industry - the bottom has fallen out of the iron ore market, for example. This fallout from the mining industry is something that Whelan has also seen in Perth. “A lot of Irish guys were lured here by big wages in the mining industry but now many of them have lost their jobs.”
‘Alex Coffey (25), returned from Sydney four years ago. He cites the high wages in Australia, even for unskilled workers, as another parallel with Ireland which he also says have caused damaged. “The average wage was between $50,000 and $55,000 a year. I knew a barman (21) who was on a three-figure salary and he got a $12,000 commission cheque too. Some of these guys were clearing $3,000 a week, its madness. It’s like a micro economy, it doesn’t reflect the rest of world. The main thing is that I don’t think it’s sustainable, it is no longer cost competitive.”
‘The question really is, where will it all end? David is hearing the alarm bells but he believes the authorities, including the likes of the Central Bank and regulators, aren’t calling a halt - again similar to what happened here. “We can’t afford to keep doing what we’re doing,” David added.’
‘Again, uncannily like the situation was here, he added that the unfortunate victims of the “wealth creation” strategy are young house buyers and middle-income earners who are either priced out of the market or are leveraged through the roof. “What we were basically doing (in Australia) was copying the Irish wealth creation model and calling it a different name,” he added.’
‘Buying the worst house in the best street has reached a new level with the listing of decrepit Dutton Park Queenslander. “There’s no way to sugar-coat this,” the advertising reads.’
‘The floor has caved in, the verandah has collapsed and the walls are patch-work of rotting timber. But if you want to knock it down you’ll have to apply for special permission - anything built before 1946 in Brisbane needs council approval before the wreckers can move in.’
‘That hasn’t stopped a torrent of online interest in 50 Deighton Road though. “I’ve never a seen a response as great as this. We are off the charts,” Ray White agent Gunther Behrendt says.’
Check out the photos.
‘New home prices in Chinese cities rose month-on-month in July for the third straight month, a private survey showed on Friday, reinforcing the upward trajectory since the second quarter. In Shenzhen, a local court recently declared its first ruling on a housing sale contract violation. The plaintiff sued the home owner after he raised prices twice after the contract was signed. The owner wanted to hike the total unit price to 2.6 million yuan from 2.2 million yuan initially, and later to 3.1 million yuan, after the buyer accepted the first hike. According to Centaline, 60 percent of contracts have been revoked in Shenzhen since looser policies were introduced on March 30.’
‘Yan Yuejin, an analyst with E-house, said: “After the consecutive monthly price hikes in big cities, the best opportunities to ‘buy low’ have passed. The third quarter is the next prime time to cash in before sales and prices start climbing in September, a traditionally boom period.”
‘Beijing is cracking down on housing speculation in its eastern Tongzhou District, soon to be a subsidiary administrative center for the capital, after recent price rises and false advertising by developers.’
‘In a recent law enforcement campaign, the district’s government authorities asked two real estate companies to correct their advertising claiming that housing prices will rise, said a district official.’
‘The construction of the subsidiary administrative center is part of Beijing’s plan to deal with its own “urban ills” such as traffic congestion and to implement the integrated development strategy.’
‘Residential rents in Dubai, UAE, declined by 3 per cent in the second quarter of the year in the face of 6,750 new housing units that were delivered during the period, a report said. Capital values for completed apartment units fell 3.5 per cent drop quarter-on- quarter, with averages sale prices in Business Bay witnessing the biggest fall of 5 per cent.’
“The volume of new projects in the Dubai market means that properties will increasingly need to appeal to potential buyers’ sense of value,” said Paul Maisfield, CEO of MPM Properties, the real estate advisory subsidiary of Abu Dhabi Islamic Bank (Adib). “That means a shift towards well managed, self-contained and mid-market properties, particularly close to the Expo 2020 site. We are also seeing a greater emphasis on buyer incentives and unique selling points, especially in the luxury segment and expect buyers to benefit from these trends.”
‘Texas is seeing a huge influx of Chinese buyers, both investors and owner occupants, thanks to more affordable housing. And recent turbulence in China’s stock market is likely to boost demand for U.S. property, not hurt it.’
“My schedule is very full. Sometimes I cannot handle more,” said Shirley Mei Qing, a real estate agent with Keller Williams in Houston, adding that she’s seen a 30 percent increase in Chinese clients in the past year. “The main reason is the house market here — comparably, the price is better than the East and West Coasts.”
‘Texas ranks number one in new home construction in the United States, and Chinese have long favored new over existing homes. Witness a massive development in Irvine, California, that continues to be fueled overwhelmingly by Chinese demand. Texas is about twice as large as California in total home production, according to the National Association of Home Builders.’
heh…. realtors tell tall tales.
14,163 properties found Houston, TX Real Estate and Homes for Sale
http://www.realtor.com/realestateandhomes-search/Houston_TX
3,804 properties found Houston, TX Price Reduced Homes for Sale
http://www.realtor.com/realestateandhomes-search/Houston_TX/show-price-reduced
Given the fact that Houston area asking prices of resale housing are 250% higher than long term trend, there is much more price cutting on the menu.
The property taxes in Texas will eat them alive.
At 50 houses a page, there are 284 pages of houses for sale in Houston. I chose price reduced and quit at page twenty because I got tired of clicking. The only person who’s a bigger tard than this realtor is the reporter who quoted her.
I see the second link shows 77 pages of reduced prices. Excellent work grasshopper.
“Apples Stock Drops Below 2 Bearish Technical Levels”
http://www.marketwatch.com/story/apples-stock-drops-below-2-bearish-technical-thresholds-2015-08-04
Massives stockpiles of cheapo electronic gadgets don’t get it. Layoffs.
Let her rip….
‘Chinese commercial real estate developer Dalian Wanda Commercial Properties Co. (3699.HK) has confirmed that it will close 40 shopping malls throughout China, including in Jinan, Tangshan, and Shenyang, reports nbd.com. The company will also close 80 KTVs at the same time.’
‘Why It Matters: Dalian Wanda Commercial Properties is the largest commercial real estate developer in China.’
http://sgi.seleritycorp.com/dalian-wanda-to-close-40-shopping-malls-in-china/
I would imagine that commercial real estate in China is just as big a disaster as residential.
I find that comment remarkable even if others do not. China hired Goldman Sachs to help with their stock market infrastructure and we have merely a deja vu of the NYSE.
We have the same outcome as 1987 only with a different naive group. I would be an angry Chinese bureaucrat unless I was directly benefiting from the collapse orchestrated by Goldman Sachs. The Chinese govt could have limited margin buying and prevented the collapse. This confirms either their ignorance or support of Goldman Sachs. I tend to think both.
Comment
“I was forced by the brokerage to sell because I had borrowed on margin.”
“I was forced by the brokerage to sell because I had borrowed on margin.”
I find that comment remarkable even if others do not. China hired Goldman Sachs to help with their stock market infrastructure and we have merely a deja vu of the NYSE.
We have the same outcome as 1987 only with a different naive group. I would be an angry Chinese bureaucrat unless I was directly benefiting from the collapse orchestrated by Goldman Sachs. The Chinese govt could have limited margin buying and prevented the collapse. This confirms either their ignorance or support of Goldman Sachs. I tend to think both.
Comment:
“I was forced by the brokerage to sell because I had borrowed on margin.”
Comment:
‘I was forced by the brokerage to sell because I borrowed on margin.”
I’ll bet all those million dollar houses were originally sold for $50,000 to blue collar households 20+ years ago.
A lot of ChiComs are gonna learn the cozy feeling of a Joshua Tree you know where when the bubble explodes, as they lose most of their investment.
I guess the ChiComs can’t help themselves. Compared to the dystopian Bladerunner like eco disaster back home, New Zealand must look like the Garden of Eden by comparison. “Grandfather! What are those things in the sky? And why isn’t the air brown here?”, “Those are stars my child, and this is our new home.”
Think about it. There must be at least 2 dozen Chinese cities with more people than all of New Zealand.
“I’ll bet all those million dollar houses were originally sold for $50,000 to blue collar households 20+ years ago.”
More likely $25k back then. And they’ll sell for that much again.
Hovnanian Enterprises Inc. (HOVNP) -Nasdaq
7.60 Down 1.59(17.30%)
http://finance.yahoo.com/q?s=hovnp
This is on top of a big decline yesterday. Now it’s spread to the NYSE listing:
Hovnanian Enterprises Inc. (HOV) -NYSE
1.84 Down 0.15(7.54%)
http://finance.yahoo.com/q?s=hov
Shares of a company that can’t make money in a bubble aren’t worth much. The head guy from there was on Bloomberg saying that we will all be sorry (for not buying now) in a couple of years when both prices and interest rates will be higher!
Boo hoo. Pump and dump through guilt tripping??
What’s next, yer broker answers the phone sayin’ “…you only call me when you want something…”
Millennial whining climbs the corporate ladder.
Did you look at the Share Statistics Heading?
Compare its float vs daily trading volume.
What does that mean?
Vienna, VA Housing Prices Crater 12%
http://www.movoto.com/vienna-va/market-trends/