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CHINA: New Leadership; Major Stock Low coming ?

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China's New Leadership : Changes & Major Stock Low coming ?

Chart updated : CHINA LAGS
From near the 2009 LOW in US stocks, China's Shanghai composite has lagged by a lot

ShComp vs SPX ... fr. 2/1/2009 :




Do all Chinese Leaders think the same, or is this a ruse?

China's new party leader eschews predecessors' rhetoric

Xi Jinping's speech omits mention of Marxism-Leninism or Mao Tse-tung. Instead, he focuses on the need to improve the people's well-being and tackle corruption.

Xi Jinping's debut performance Thursday as China's new leader won him plaudits for being concise, clear and refreshingly free of the turgid Communist Party rhetoric of his predecessors.

China's future, Xi said, requires raising the quality of life by reducing the economy's lopsided dependence on exports. He spoke of improving housing, medical care, education and the environment. He also said the government would strive to "make the Chinese nation stand rock-firm in the family of nations," hinting at more assertive stances on the international stage.

Although the 59-year-old Xi is a well-known figure in China, having served the last five years as vice president, Thursday was the first time he stepped out as the party's general secretary, a position more powerful than the presidency he will take over from Hu Jintao in March.

Given his new role, his speech drew intense scrutiny from Sinologists who will parse each word for clues to how he will steer this behemoth of a nation over the next decade.

A bear-like man with a lumbering gait, Xi affected a disarming modesty as he entered the conference room at the Great Hall of the People as head of the seven-member Politburo Standing Committee. He wore a dark suit and red tie, the same attire as the others except for one whose tie was blue. Xi smiled and apologized for being 40 minutes late.

Most notable was that the speech made no mention of Marxism-Leninism or Mao, instead emphasizing the need to improve the people's well-being, a new buzzword in Chinese public discourse.

/more: http://www.latimes.c...0,1260161.story

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The last 10 years in the Chinese stock market


Shanghai Composite Index ... update : Daily-6mos : Iday-10days



HK2823 / the HK-traded etf ... update / Note: less than 10 years ... Daily-6mos




FXI / the US-traded etf ... update / note: less than 10 years ... Daily-6mos / CU-d-6mos


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China is at a crossroads in its development.

Nick Lardy, an expert on China's economy at the Peterson Institute, forecasts that with far-reaching changes, growth in gross domestic product can be sustained at around 8% a year through 2021. Without change, Mr. Lardy estimates the average could be closer to 5.1%.


/see: http://online.wsj.co...3592216824.html



Capsule's on each of the Key New leaders / The Seven person Standing Committee within the 25 person Polituro


1/ Xi Jinping, General Secretary

Mr Xi, the son of a revolutionary hero, is the first princeling to take the top part post



2/ Li Keqiang

Mr Li will likely take over Premier Wen Jiabao's portfolio, including economic responsibilities.

Li is one of two of Hu's proteges in the SC, and is also one of the few leaders with relatively fluent English. He had exposure to Western ideas as a student, and has had an eclectic career, setting him apart from the new and previous generations of leaders: "Li Keqiang is really a liberal, politically and an economically," says Prof. Bo Zhiyue, a professor at Nat'l Univ. of Singapore, who knew him at Peking University.


3/ Zhang Deijiang

Mr Zhang was educated in North Korea and oversaw Guangdong's 2002 controversial handling of the SARS outbreak there


4/ Yu Zhengsheng

The oldest member, Mr Yu sidestepped problems stemming from his brother's defection to the US in the mid-1980's.


5/ Liu Yunshan

Mr Liu a top propoganda official, is seen as someone who will likely stand in the way of political reform


6/ Wang Qishan

Mr Wang was named anti-corruption chief, an appointment seen as a nod towards rising public concern towards graft


7/ Zhang Gaoli

Mr Zhang, former party chief of Tianjin, is considered a strong advocate of state sponsored investment


"Jiang had a heavy hand in the selection," say the WSJ.

+ Five of the 7 SC members are considered allies of the 86-year old former party chief, suggesting that he remains a political force a decade after his retirement from the top post


+ The faction of China's president, Hu Jintao, won only two of the SC seats, suggesting he was outmaneuvered by Mr Jiang. But a number of his allies are in the polituro and could rise to the Standing Committee five years from now - when all the incoming members will retire.

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We had a possible Important Low in US stocks on Friday


SPY / etf for S&P500 ... 10d-chart : 1yr-chart



We may also have a Major Low in China stocks at (almost) the same time !


CN:000001 / Shanghai Composite Index ... 10d-chart : 1yr / 10d-HSI : 1yr / 10d-HK2823 : 1yr


(updated : 19 Nov. 2012)


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Hopes for freer rein on market - trumpets article on pg1 of SCMP Business section


Rigid controls and regulations have become "unbearable" on mainland.


Expectations are high for new leaders to make changes next year (probably late in the year.)


Important : because observors like Standard Chartered, see growth slumping to 3-4% within 10 years without market-driven change to introduce more competition for state enterprises. Growth this year may slump to 7.7%, the slowest since 1999, and down from a one decade average of 10.6 per cent.


Mentioning a report called China 2030 (from Feb. 2012):

"The report highlighted the need to overhaul state-owned companies, banks, land, labour and financial markets, promote competition and reduce the role of government."


The document was endorsed by premier-in-waiting, Li Keqiang (according to a Sr. Economist for China at Citigroup.

=== ===


+ China announced tax breaks on dividends for LT holders


+ Property prices rose in 35 of 70 mainland cities - indicating the govt will not cut curbs


+ Co directors in HK: last week felt the urge to SELL their co's shares

(21 directors of HK co's sold HK$42.6mn, while: 14 co's sold HK$100mn.)

But Co's like Johnson Electric (HK179), Soho China (HK410), and First Pacific (HK142) were buying their own shares.

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TWO ACQUISITIONS - By Chinese companies announced :



+ Sinopec buys Nigerian oil stake for US$2.5 billlion, 20% interest, sold by Total


+ Chengdu Tianqi bids for Canadian Miner Talison Lithium, valuing TLH at C$806 million.

CT paid C$7.15, that's 65 canadian cents higher than the Rockwood Holdings bid




"Talison confirms that today it received a non-binding, conditional proposal from Tianqi at C$7.15 per share."


/site: http://www.talisonlithium.com/


Talison is a leading global producer of lithium and has been supplying a global customer network

from the Greenbushes Lithium Operations in Western Australia for over 25 years. In anticipation of

sustained growth in lithium consumption, driven primarily by the secondary lithium battery market,

Talison has doubled its production capacity at the Greenbushes Lithium Operations.

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INFLOWS to China shrink further


FDI into China fell last month - for the 9th time in 10 months


Meanwhile: "conditions for Chinese co's to invest abroad are improving"

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3rd Quarter 2012


China’s economic growth slows but its retail market remains steady


Consumer spending remained strong in China in the third quarter of 2012, despite uncertainty over the global economy. Developers began to switch their investment towards commercial property, following a series of buying restrictions on the residential market.

With China’s economic growth slowing, many luxury brands have seen sales growth slip. If the trend continues, some brands may adjust their expansion plans, which could cool the growth in China’s retail market. Beijing's market, therefore, could experience further growth, but at a slower rate.

In Shanghai, upcoming department stores and shopping centres, including L’Avenue and Park Place, will provide over 146,000 sq m of space. Prime retail rents would grow further, given their prime locations which will attract even more international brands to Shanghai.


Guangzhou’s retail market would not see significant growth in 2013 with continual economic uncertainty, despite stable supply and sales. Retail rents there could climb further if the economic conditions remain, given the projected demand and supply levels.


/KnightFrank: http://project.knightfrank.com.hk/xmasref/marketing/reports/reports/KF_GC_Q3_2012Report.pdf

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So far, China stocks are holding most of yesterday afternoon's big Gains ... CN:000001


For the record, in case yesterday was THE Low



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China absolutely needs export markets to recover - particularly the EU (her biggest trading partner)... unlikely anytime soon...


Heavy Lending Creates a Surge in Chinese Economy


The renewed growth has been fueled by rapidly mounting debt, as state-owned banks and the central bank have funneled hundreds of billions of dollars in additional lending to state-owned enterprises and government agencies to finance further investment projects.





Is China's Spurt Sustainable?


According to data issued Friday by the China Trustee Association, an industry body, new funding provided by China's trusts—a type of wealth management company that taps private funds—for infrastructure projects was 310.86 billion yuan ($49.7 billion) in the third quarter, almost triple the 116.24 billion yuan they provided a year earlier.


The timing of a turnaround, so close to the Party Congress, is bound to raise questions of whether the numbers are being manipulated to show progress, or whether policy makers are giving the economy a one-shot dose of adrenaline that will dissipate quickly.


Some China analysts, though, doubt that's the case. The turnaround started in September, with a pickup in exports and manufacturing and has continued into October.



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Yes China is on its way... probably to bankruptcy... because they are continuing to attempt to maintain growth by investing in more 'bridges to nowhere'....


The EU is China's biggest trading partner... common sense would dictate that China cannot thrive when it's biggest market is in crisis... with the US not far behind....


Here is a typical Bearish chain of events:


1) Stimulative monetary policy creates falsely optimistic market signals.

2) Private investment firms act aggressively on these false signals.

3) As a result, the private sector "malinvests," i.e. allocates badly.


4) Capacity is increased prematurely, supply ramped up excessively, etc.

5) When the stimulus wears off, the economy is in worse shape than before.

6) Overhang of excess debt, capacity, supply etc. serves as a dead weight.


7) Struggling to ignite growth, the authorities order more stimulus.

8) A speculative bubble ignites instead, furthering the malinvestment.

9) Yet more excess capacity, debt, supply etc. is accumulated.


10) The additional stimulus wears off…

11) Repeat the process until you get full-on economic collapse.


More http://seekingalpha....ase-of-all-time

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More news confirming a recovery is starting in China (and supporting my view to buy China stocks):


Monday, November 19, 2012


The mainland economy has stabilized and is expected to attain a high level of growth for a long period, said Premier Wen Jiabao.


A state researcher, meanwhile, forecast an 8 percent growth rate next year.


"We will continue to be the engine of economic growth in the world and in the region," Wen told China News Service on his flight to Phnom Penh yesterday to attend the 15th summit between China and the 10-country Association of Southeast Asian Nations.


"It is the only right choice and our mutual wish to make a concerted effort to overcome the current difficulties as the recovery of the world economy is slowing down and East Asia is facing increasing pressure," Wen said.


He called for solidarity and cooperation among ASEAN members and advocated new development themes.


Senior state researcher Lu Zhongyuan expressed optimism over the mainland's growth.


"China's gross domestic product growth is highly likely to exceed 8 percent next year as the external environment improves," said Lu, vice president and senior research fellow of the State Council's development research center.


Speaking at a Beijing forum yesterday, Lu estimated GDP to be between 7.5 and 8 percent this year driven by domestic growth.


In the first three quarters, GDP rose 7.7 percent year-on-year, compared with 9.3 percent in the same period last year. The mainland has targeted 7.5 percent growth in 2012. Lu expects the 12th Five-Year Plan period, which runs from 2011 to 2015, to be around 8 to 9 percent, and around 7 percent from 2016 to 2020.


Also some signs Chinese property prices have stabilized:


Home prices in China rose 0.05 percent in October from September, calculations based on official data showed yesterday, adding to evidence of a recent, mild recovery in the country's property market and frustrating the government's efforts to temper prices.


It was the third month-on- month increase in five months following Beijing's decision to cut interest rates once each in June and July, which improved access to mortgage credit, and in the wake of policy tweaks by some cities to boost local property markets.


Average home prices in 70 major cities across China rose 0.05 percent in October from the previous month, after staying flat in September and June and increasing in August and July, according to calculations.


Per AX post

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From DrB' s Diary:

If Larry P is right about US stocks peaking on Wednesday, Hong Kong's HSI may peak along with them: HSI-chart



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(Herein: shorter Chart links)


HSI has been holding up


Chart : http://charts.aastoc....gif?a=69577564

HSI / 10 day chart : http://tinyurl.com/HSI-10days


HSI is holding better than China stocks quoted in Hong Kong (HK-2823).

HSI versus HK-2823 and CN-00001 (Shanghai index): http://tinyurl.com/HSI-vsHK2823-CN


And far better than the Shanghai stock index

CN-000001 / 10 days : http://tinyurl.com/CN00001-10d


WHY the Gap ???

Maybe we will SOON SEE THEM ALL FALL together

=== ===



Shanghai / CN000001 - is already down to 1,950, having recently broken 2,000

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If HSI cracks 21,500, it could fall all the way to 18,500 ... update




Note the recent "unconfirmed" high

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He's Xi Man !


When the New Leader speaks, the market listens...



This Price move may kill the Bear scenario that I have laid out


+440.38 +2.02%



Shanghai Index : 2,031.91 +56.7635

Open:1,973.1066 / High:2,040.6036 / Low:1,970.2015

Volume: 119,973,040

Percent Change: +2.87%

Here's why:


China Stocks Rally on Stimulus Hopes


Wall Street Journal-2 hours ago

SHANGHAI—China shares soared Wednesday after hovering near four-year lows, because of hopes for more economic stimulus policies, ...


China's Stocks Rise Most in Three Months; Machinery Makers Surge

San Francisco Chronicle-5 hours ago

== ==


HONG KONG — Chinese shares had their best day in three months on Wednesday, lifting Hong Kong to its highest since August 2011 after comments by the new head of the Communist Party about the government’s economic priorities boosted optimism.

Chinese property and infrastructure stocks were among the top gainers after Xi Jinping listed tax reform, urbanization and a bigger price-setting role for the market as key objectives. He was speaking ahead of the party’s central economic planning meeting this month.

. . .

“Xi’s comments suggest he thinks the slowdown in the Chinese economy has bottomed and inflation is not going to be a big problem,” said Hong Hao, chief equity strategist at Bank of Communications International Securities.


/more: http://business.fina...the-new-leader/

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(some counter evidence to the recent rally?)


More rich and skilled Chinese emigrate

Source: SCMP (A3, 19 Dec 2012)

According to the International Migration Report (2012) released jointly by the Centre for China and Globalisation and Beijing Institute of Technology’s law school, the rich and educated elites in China are becoming the main force in emigration. Some major findings are as follows:


- more than 150,000 Mainlanders obtained overseas citizenship in 2011, making China the world’s biggest source of immigrants

- more than 87,000 Mainlanders emigrated to the US last year, around 30,000 to Canada and the same number to Australia and more than 6,000 to New Zealand

- just over 6,000 Mainlanders became permanent citizens of the US, Canada or Australia through investment last year

- more than half of the Chinese emigrants to Australia were skilled workers, accounting for more than 40% of skilled immigrants in the country


UN cuts world growth forecasts

Source: Channel News Asia (online, 19 Dec 2012)

The United Nations (UN) cut its global growth predictions to 2.4% for 2013 and 3.2% for 2014. China's economy will grow by 7.9% in 2013 and 8% in 2014. The US will have a 1.7% growth rate for 2013 while Japan a 0.6% growth. Growth in Southeast Asia will be 6% in 2013 and 6.3% in 2014

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Diplomat inadvertently reveals China amassing gold to shore up the yuan


"shore up"?

The Yuan does not need any shoring up !

He means to BACK THE YUAN as a rival global currency to the US Dollar

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China Builds Up Its Gold Reserves


As fewer currencies can now be called non-fiat, the attractiveness of Gold as a reserve asset

has increased. In addition to the countries mentioned above, China also seems to be building

up its Gold reserves. It has long been argued that even if China wanted to diversify its $3

trillion of reserves, it could not diversify into Gold without disrupting the Gold market.

However by stealth, China seems to be doing just this. As well as being an important Gold

consumer, China has become the world’s largest producer of Gold and is likely to be the

largest importer of Gold too, in 2012. In addition, it is buying Gold mining companies around

the world. All in all, this suggests China is building up its Gold reserves. The last time China

made public its reserves they had doubled to 1,054 tonnes, that was three and a half years

ago in April 2009.


Gold Reserves: Tonnes : $ Billions


United States--- : 8,133.5 : $ 466.8 Bn

Germany-------- : 3,395.5 : $ 194.9 Bn

IMF -------------- : 2,814.0 : $ 161.5 Bn

Italy -------------- : 2,451.8 : $ 140.7 Bn


France ---------- : 2,435.4 : $ 138.8 Bn

China ------------ : 1,054.1 : : $ 60.5 Bn

Switzerland ----- : 1,040.1 : : $ 59.7 Bn

Russia ------------- : 936.6 : : $ 53.8 Bn

Japan -------------- : 765.2 : : $ 43.9 Bn

Netherlands ------ : 612.5 : : $ 35.2 Bn

India ---------------- : 557.7 : : $ 32.0 Bn

ECB ---------------- : 502.1 : : $ 28.8 Bn


If they make another update the market should be braced for a significant increase. In 2009, the

market reacted bullishly to the news and we would expect a similar reaction if another update were to

emerge – that is as long as it did not look as though China had built up enough reserves to slow down its

accumulation. This seems unlikely as even if China doubled its holdings again it would still be below that of

France, Italy, the IMF, Germany and the US – see table above. China’s official Gold holdings of 1,054 tonnes

only account for some two percent of its reserves, whereas Gold held by the US, Germany, Italy and

France accounts for around 70 percent of their reserves. We feel central banks’ purchases of Gold will continue,

driven by the prospect of further currency debasement and higher inflation down the road.


As well as seeking ways to diversify its reserves, China, may also be looking to build up its

Gold reserves with the idea that before too long it will want to make the yuan a freely

convertible currency.


/source: http://www.scotiamoc...orecast2013.pdf

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Diplomat inadvertently reveals China amassing gold to shore up the yuan



Today acclaimed money manager Stephen Leeb stunned King World News when he said he was recently speaking with a Chinese diplomat and the diplomat accidently admitted to him that China was accumulating gold specifically to back the yuan. This was a shocking admission and the diplomat then attempted to backtrack but it was too late.


I was just speaking to a Chinese diplomat and I said to their diplomat, ‘Your two most important commodities are water and gold.’ And this diplomat said to me, ‘Yes, we need gold to back up the yuan.’ Well this diplomat realized very quickly they had made a terrible mistake in admitting that and began to back off and stated, ‘No, it’s not to back the yuan. It’s because of jewelry.’ But it was too late, the horse had left the barn so-to-speak.


(Water and Gold ... and Food)

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China: Pause or Rollover?


Yesterday's strong upwards move / CN--1-chart


...suggests the brief pause may be over


CN--1 / Shanghai Index :

2,311.74 + 68.74 / + 3.06%


The rally in China followed comments after Guo Shuqing, chairman of the China Securities Regulatory Commission, reportedly said the country could substantially increase the amount foreigners are allowed to invest in local equity markets.


Reports of strong recent inflows into global equity markets and hopes that strong liquidity would further push up stocks also aided the broad advances.

Japanese markets were closed Monday for Coming of Age day, but the yen lost more ground against major rivals, extending its steep recent losses on hopes for further monetary easing.


/see: http://www.marketwat...&dist=bigcharts

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Changing Nature of China's economy may be something to watch here


CHINA is "outperforming Copper"


China stocks (FXI) have been rising without dragging Copper higher - same with Oil




I am still thinking through the implications here.


+ China seems to be shifting its economy away from a pure industrial focus, or


+ Is the current rally just a brief Dead-cat bounce?

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China's Broken Shock Absorber


Submitted by Tyler Durden on 02/01/2013 - 21:32



Analysts who’ve only started paying attention to the country in the last decade often seem convinced that China has no real business cycle, or a very mild one, that because its economy is centrally planned, it’s free from the fluctuations in investment that cause booms and recessions in countries that lack the scientific guidance of a Leninist single-party state. This convenient belief, however, is mostly an artifact of the period over which they’ve been observing its economy. The boom of the early 1990’s wasn’t followed by the usual bust. Instead, after a fairly mild slowdown, another boom period began towards the end of the decade, without the usual deep cyclical trough between expansions. However, this anomaly suggests that it is unlikely to be repeated.


We’re probably living, now, with a China that’s back to the sort of violent swings in economic activity, and repeated struggles with inflation, that have been characteristic of most of its recent history. To understand why, it’s necessary to understand DeWeaver's explanation of the nature of the cycle itself.

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