China's Blow-Off Top. Here We Go!

[AvidFan]

http://www.thefirstpost.co.uk/60052,business,fears-for-china-and-the-world-economy-as-property-prices-soar-bubble

Fears for China economy as property goes sky high

Can new government controls stop China’s property bubble bursting?

By Edward Helmore

LAST UPDATED 2:31 PM, FEBRUARY 23, 2010

As British and American bankers waive their 2009 bonuses in an attempt to win public favour - Lloyds chief executive Eric Daniels being the latest - and currency traders predict a sustained drop on concern over EU member deficits, there are repeated warnings over the condition of the Chinese economy.

Specifically, there are new concerns that a Chinese property bubble is ready to burst.

On Monday, the significant Hong Kong developer Sun Hung Kai agreed to pay US$434 million - $175 million over the reserve - for a 130,000 sq ft site in the suburbs. Across Hong Kong, prices for luxury apartments rose 50 per cent last year. Over the same period in China, property values have jumped by a quarter.

The People's Bank of China is introducing measures later this week requiring banks to hold more cash, a new and popular way of curbing excessive lending.

Emblematic of the Chinese boom is Huaxi. In the 1970s it was all bamboo huts and ox carts. Today it's home to 30,000 residents who boast of a per-capita income four times the national average. Huaxi claims it is China's richest village and plans a 1,760 metre skyscraper second only to Dubai's Burj Khalifa in height.

Marc Faber, publisher of the Gloom, Boom & Doom Report, suggests this is evidence of a dangerous over-reach: it makes no sense for China to build more capacity where there is already over-capacity. "I think the Chinese economy will decelerate very substantially in 2010 and could even crash," he says.

Meanwhile Singapore's government is trying to "temper sentiments and pre-empt a property bubble" by imposing a tax on anyone flipping properties within a year of purchasing and capping mortgages at 80 per cent of a property's value.

And back in Hong Kong, the government says it is prepared to adjust land policies if necessary. "Hong Kong property buyers have been in a prolonged low-interest-rate environment, and now they're behaving like drunken drivers on the road - they don't think about consequences," says Nicole Wong, a property analyst.

The Chinese government has placed curbs on lending to force the stock market down, but many say it's not enough. Hedge fund manager Jim Chanos says China is Dubai times a thousand. Marc Faber says that if the Chinese economy crashes it will lead to a "disastrous environment" for commodities. George Soros said last month: "The Chinese market is overheating."

[TwoWolves]

http://www.citywire.co.uk/selector/-/news/fund-manager-interviews/content.aspx?ID=383937&re=8538&ea=230316&Page=2&ViewFull=True

China is the biggest bubble since tech, says AA-rated star manager

China will be the investment disappointment of the decade, on a par with the tech bubble of the 1990s, according to Cazenove Capital’s AA-rated fund manager Chris Rice .

A renowned contrarian, Rice runs the €764 million Cazenove European fund and in total manages around €2.8 billion in both long-only and long/short strategies with co-manager Steve Cordell.

Although not a stranger to swimming against the flow, Rice’s calculated gamble to avoid stocks and sectors exposed to China leaves him in the corner of a room with a select band of Sino-sceptics, such as Société Générale’s perpetually bearish strategist Albert Edwards and GMO’s asset allocation specialist Edward Chancellor.

Rice said: ‘I think there will be not be a more disappointing investment theme over the next decade than China. It has quite a lot of similarities with the tech bubble of the 1990s.’

Rice illustrates his concerns by contrasting the 2009 stock market revival with what occurred during the 2003 recovery. He cites long-term valuations, namely cycle-adjusted price/earnings ratios, as an indication that the influence of China’s predicted growth has distorted the market.

He said: ‘We felt that in 2009 the recovery was coming, to a significant extent, from risky stocks that were not cheap. In 2003, all four recovering parts of the market – financials, commodities, industrial and consumer stocks – were all cheap on a long-term view.

‘At the turn of 2009, only half of those were cheap. We started buying financials and consumer discretionaries in November 2008 but commodities and industrials were incredibly expensive and remain so,’ he added.

The main reason behind the expensive valuations of the latter two sectors is because of their association with China, Rice said.

‘The market believes China is a structural growth engine of the world economy and it pays a massive premium for stocks that are exposed to that as opposed to the stocks exposed to the Western consumer.’

Returning to his comparisons with the tech bubble, Rice notes that while technology has achieved many things that the markets envisaged, ‘the problem was that the amount equity market paid for the potential profits was too high’.

He added: ‘It’s the same with China today. We are massively overpaying for that concept. Our call for 2010 is that it will get found out over the next 18 months.’

Rice’s last contrarian stand in 2007 saw him turn bearish before the market and was predicated on the view that the huge and growing imbalance in the world economy would significantly impact on risky asset prices. He got it right and in 2008 he was one of the top performing European fund managers.

Although betting against China is a gamble and has already hurt Rice’s performance in 2009, his three and five-year figures suggest the contrarian approach has paid dividends in the past. Over five years, he has returned 35.33% in euro terms and is ranked 6/41 in the Europe ex UK sector, in which the average manager has returned 15.8% (see table here).

[R K]

Jim Chanos says China is Dubai times a thousand. Marc Faber says that if the Chinese economy crashes it will lead to a "disastrous environment" for commodities.

Rien ne va plus!

[AvidFan]

Rien ne va plus!

I wish I could find the Team America moment when someone says that the next disaster would be like 911 times a million. But YouTube hasn't been able to come up with the goods so far

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

FECK!

[Lander]

"As British and American bankers waive their 2009 bonuses in an attempt to win public favour - Lloyds chief executive Eric Daniels being the latest - and currency traders predict a sustained drop on concern over EU member deficit"

They might do better by jumping out of a window to win back the favour of the public

[Si1]

so f*cking what?

[ExecutiveSlaveBox]

The Chinese government has placed curbs on lending to force the stock market down, but many say it's not enough. Hedge fund manager Jim Chanos says China is Dubai times a thousand. Marc Faber says that if the Chinese economy crashes it will lead to a "disastrous environment" for commodities. George Soros said last month: "The Chinese market is overheating."

That would be fairly disastrous for Australia, only thing keeping Oz afloat is China.

Come on Bardon, deep down you know this crazy shit can't last.

[Si1]

"George Soros said last month: "The Chinese market is overheating.""

indeed - armageddon this is not

the UK saw several bubbles grow and colapse during its industrial revolution

again I ask - what is there to be worried about?

chinese industry owes money to the Chinese govt

and Chinese govt isn't itself a net creditor. so there's a limit to how bad it could get. which isn't very.

[oracle]

http://www.thefirstpost.co.uk/60052,business,fears-for-china-and-the-world-economy-as-property-prices-soar-bubble

Fears for China economy as property goes sky high

Can new government controls stop China’s property bubble bursting?

By Edward Helmore

LAST UPDATED 2:31 PM, FEBRUARY 23, 2010

mmmm..classy.

now let's try this one!

nice little message to chavez and the rest of the economic terrorists that have been trying to feck us over!.

[hilltop]

I am reminded, perhaps inaccurately, of the 1930's. One of the grievances in Britain against Germany was the dumping of manufactured goods in this country when Germany manipulated currency and input costs. It ended badly.

In the sixties, I seem to remember Opal cars being sold here very cheaply, that ended well for the German motor industry.

The difference was the political change in Germany between those times.

I suggest that the Chinese political system is not robust enough to cope with the beasts it has created. That is the worry.

[ken_ichikawa]

so f*cking what?

China blows up, it takes us with them as the bond market collaspes, we get hyperinflation, even worse there are 100 or so million peeved off men and women in China that the government conscripts into the army and starts a war to keep them distracted. Somebody stated that they can only mobilise 3% of their population (which is still a lot of people).

If blows up people like me and you or rather you (as I would be sent to an internment camp) would be conscripted to stop them as the 7th fleet and combined US forces would be able to hold them off for a few days but eventually would be overwhelmed. UN weapons might be advanced by as Stalin once said quantity has a quality all of its own. See battle of Imjin river with the Glocs who were annilated.

We might think we have the edge, but so did Task force Smith in the Korean war, who were sent to stop the NK forces,

Edited February 23, 2010 by ken_ichikawa

[Wario]

Stalin once said quantity has a quality all of its own. See battle of Imjin river with the Glocs who were annilated.

We might think we have the edge, but so did Task force Smith in the Korean war, who were sent to stop the NK forces,

Well the PLA certainly liked to do things the "expensive" way, 200,000 in the frontline alone, against a tiny peasant nation already tapped out, manpower-wise, by decades of Total War.

Obviously the Plan was to lose thousands of troops and a shedload of tanks, in a limited action merely intended to make the Ivans back off, and a Tactical Withdrawal was precisely that, as an infantry army that big is irresistable.

Yeh.

[Guest Noodle]

China blows up, it takes us with them as the bond market collaspes, we get hyperinflation, even worse there are 100 or so million peeved off men and women in China that the government conscripts into the army and starts a war to keep them distracted. Somebody stated that they can only mobilise 3% of their population (which is still a lot of people).

If blows up people like me and you or rather you (as I would be sent to an internment camp) would be conscripted to stop them as the 7th fleet and combined US forces would be able to hold them off for a few days but eventually would be overwhelmed. UN weapons might be advanced by as Stalin once said quantity has a quality all of its own. See battle of Imjin river with the Glocs who were annilated.

We might think we have the edge, but so did Task force Smith in the Korean war, who were sent to stop the NK forces,

Civil war more likely. Been on the cards for years, those folks have had enough of the communist party.

[TwoWolves]

Civil war more likely. Been on the cards for years, those folks have had enough of the communist party.

+1 Agreed.

[bazzzzzzz]

That would be fairly disastrous for Australia, only thing keeping Oz afloat is China.

Come on Bardon, deep down you know this crazy shit can't last.

Spare a thought for those poor property speculators based in HK. Ho-hum

[Dubai]

Plus...

Who wants to buy sh1t made in China anyway? It's half the price but lasts one tenth of the expected time! Total fvckin' junk. I'd rather pay double and have something that does what it's supposed to, for more than a week.

People are wising up to false economy.....

[Ruffneck]

Plus...

Who wants to buy sh1t made in China anyway? It's half the price but lasts one tenth of the expected time! Total fvckin' junk. I'd rather pay double and have something that does what it's supposed to, for more than a week.

People are wising up to false economy.....

i have seen some stuff that is on par with 1st world made stuff but it was almost the same price which kind of defeats the purpose of buying chinese in the first place

[expatowner]

Its very very misleading to say that prices in Hong Kong affect what happens on the mainland of China.

Hong Kong has limited land and only 7 or 8 million people who generally are much wealthier than their counterparts on the mainland. The two are chalk and cheese.

Its like prices in Mayfair being reported as rising and (wrongly) saying that Jock Mctavish in the Outer Hebrides wont be able to afford a croft next year.

Ludicrous.

[expatowner]

Spare a thought for those poor property speculators based in HK. Ho-hum

You mean like Blubbypants?

Property has increased in the last year.

Pity he sold 7 of his BTL flats before they started going up.