Overnight has seen China return to focus and for once not in a negative way. Chinese stocks have been fading as steadily as opinion on Chinese growth prospects so the headline that Li is declaring 7% growth as the floor, leading to a 2-3% rally in Chinese stocks and a general purpose creep upwards in all things EM and carry, has been notable.
But TMM think that taking Li at his word on this is like taking the cougar at the bar on her age. If anyone thinks that Li's remark is more credible than her claim to be 28 today, someone is carrying a fake ID or is very gullible.
In our efforts to get a more realistic picture of what is going on in China TMM have resorted to progressively more exotic measures as many have been gamed. For example, the State Energy Regulatory Commission used to produce some pretty good daily data on power output that can be seen below. Sadly, we haven't seen this data since early June and doubt it is coming back - it showed very mediocre power generation growth up until then.
Stepping further away, we have been watching coal markets in Asia and the picture is very ugly. Chinese imports are down from all sources per Chinese Customs data and given this data tracks the ABARE data from Australia and Indonesian data fairly well historically we can assume it is real (for now). Things look particularly ugly in June which just so happened to coincide with a minor stroke in China's onshore funding markets.
And as has been reported elsewhere by Morgan Stanley and others, the credit quality of local corporates is not improving and debt levels are not dropping.
So, colour TMM sceptical - it's a crowded trade and due for a bounce but fundamentally speaking there isn't much to get excited about. Without a massive increase in the fiscal deficit or redistribution or exports it is hard to see where the growth pickup is likely to come from.
Looking at the response in European markets either our cynicism is mirrored by others or the summer lethargy is more pervasive than even we thought.
0 comments:
Post a Comment