If China Hits The Bubble How Will This Effect Thailand

[Bizz]

If china hits the bubble how will this effect Thailand.

China's central bank's attempt to engineer a cool-down and end its bubble is going badly.Is China's meltdown starting .

We have confirmed that banks have suspended new lending since 19 January across the country. For the seven banks we contacted in various areas of China, six said that lending has been suspended while the remaining one refused to confirm.

The suspension in lending was imposed by the authorities after an emergency meeting by the central bank's monetary policy bureau. A few aggressive lenders have received a punitive hike in their reserves ratio. Reportedly, banks lent Rmb1.1 tn during the first two weeks of this year, in line with the extraordinary lending in the beginning of last year and way above the averaging lending pace over the past ten years. In responding to such a credit surge, the PBoC has launched more aggressive quantitative tightening than we previously have thought. We would expect lending to resume from the beginning of February, but Beijing will keep a close eye on lending activities. The State Council is watching the lending figures on a daily basis, instead of the usual monthly basis. We would not surprised if banks were imposed a monthly lending quota, as against a quarterly quota in 2008 (the hard lending quota was abandoned in late 2008).

HERE

Millions of Chinese are pursuing property with a zeal once typical of house-happy Americans. Some Chinese are plunking down wads of cash for homes. Others are taking out mortgages at record levels. Developers are snapping up land for luxury high- rises and villas, and the banks are eagerly funding them. Some local officials are even building towns from scratch in the desert, certain that demand won’t flag. And if families can swing it, they buy two apartments: one to live in, one to flip when prices jump further. ??

Inside China's Tightening: Banks Literally Tearing Up Letters Of Credit, Importers In Disarray, Orders Canceled

This sudden suspension in lending has caught importers, along with many other companies, by surprise and could cause turbulence in China's import orders. Letters of credit (LoC) suddenly became unavailable, despite previous agreements. We believe that this will inevitably lead to delays or cancellations in China's imports. Import orders for commodities and machineries could be affected most. Some banks suggested that they would resume issuing LoC from February, but that would be too close to the Chinese New Year. The Lunar New Year is on 14 February (China will have a seven-day holiday), and many will leave for the long holiday as early as in late January, just like the Christmas holiday in the Western world.

Forget about Dow 10,000. We've Cris-crossed that one so many times we're bored of it.

Your real focus should be on Shanghai 3,000, a threshold above which China's benchmark index sits precariously above, opening this morning down .4% to 3,007.

[lannarebirth]

I'm not a fan of borrowed money, though I understand it is essential for many businesses to pursue their business plans and growth projections. In Asia, it is my observation that getting the loan IS the business plan.

[lannarebirth]

As to how this will affect Thailand, hopefully some of the billions of funneled loans and bribes to corrupt officials will find its way to Thai property markets rather than continue to bubble Hong Kong's property market to ludicrous valuations.

[Naam]

Is China's meltdown starting

YAWWWWNNNNN...

[Bizz]

With unknown territory facing both Thailand and china something has to give and i think it will be sooner rather than later.

China needs to stimulate its economy. It's facing a very delicate situation indeed: It needs the money internally to finance its continued growth. However, if it were to sell dollar-denominated treasuries, several bad things would happen. Its currency would skyrocket -- meaning the loss of its competitive low-cost-producer edge. Or, U.S. interest rates would go up dramatically -- not good for its biggest customer, and therefore not good for China.

This is why China is desperately trying to figure out how to withdraw its funds from the dollar without driving it down not an easy feat.

And the U.S. government isn't helping: It's printing money and issuing Treasury's at a fast clip, and needs somebody to keep buying them. If China reduces or halts its buying, the United States may be looking at high interest rates, with or without inflation. The latter scenario is most worrying.

All in all, this spells trouble a big, big Chinese bubble. Identifying such bubbles is a lot easier than timing their collapse. But as we've recently learned, you can defy the laws of financial gravity for only so long. Put simply, mean reversion is a bitch. And the longer excesses persist, the harder the financial gravity will bring China's economy back to Earth.

Interesting analysis from

HERE

Faber agrees with Chanos that China is caught in several serious economic problems. He says: “There is excessive credit in China, but the oversupply of money has been used to build the infrastructure, education, and R&D, rather than consumed. And that is the difference between China and US.”

Faber is concerned about the bubble burst syndrome in China. But unlike Chanos, Faber does not see the Chinese bubble bursting so soon. “The China bubble will not burst soon. I don’t see it imminent.”

“It is very difficult to pinpoint a day when China will implode, I don’t think it will happen right way,” Faber added.

China has, indeed, been the fastest growing economy in the 2000-2009 period. There has been a boom in commodities production and consumption in China. China has overtaken several countries including India, US, Australia and South Africa in the consumption and production of several commodities including base metals and bullion.

There has been a flood of bank lending in China that has been boosting the Chinese appetite for manufacturing, gold mining, agriculture, farming etc. But is it all over?

Let us wait and watch who will be right in the Chinese bubble forecast: Jim Rogers, Jim Chanos or Marc Faber.

Edited January 27, 2010 by Bizz

[taurus88]

Really not much will affect Thailand. The bubble is mainly in real estate. Thailand do not export a lot of building materials to China. The countries that will most hit will be the hard commodity countries like the Middle East (oil), Australia (ore & copper) etc. We can expect hard commodities prices to decline. In fact a liquidity squeeze will be good for Thailand in terms of competing products like garments, shoes, toys etc

[Bizz]

Is China's meltdown starting

YAWWWWNNNNN...

Naam are you so bored with all this talk of bubble or bust stocks up or down Gold skyrocketing you can not give a lenghty answer as i have respected your analisis in the past i find your

answer some what deflating.

maybe it's the heat.

[Naam]

Is China's meltdown starting

YAWWWWNNNNN...

Naam are you so bored with all this talk of bubble or bust stocks up or down Gold skyrocketing you can not give a lenghty answer as i have respected your analisis in the past i find your

answer some what deflating.

maybe it's the heat.

i humbly apologise Bizz. i have two sick dogs which worries me more than any perceived bubbles which some "experts" see left, right, in front, at the back, up and below.

by the way, the insinuations and assumptions contained in the report you copied and pasted above (link/source does not work) are not only completely wrong but in my [not so] humble view ludicrous pure BS. anybody who follows closely what's happening in China knows that.

[Bizz]

Is China's meltdown starting

YAWWWWNNNNN...

Naam are you so bored with all this talk of bubble or bust stocks up or down Gold skyrocketing you can not give a lenghty answer as i have respected your analisis in the past i find your

answer some what deflating.

maybe it's the heat.

i humbly apologise Bizz. i have two sick dogs which worries me more than any perceived bubbles which some "experts" see left, right, in front, at the back, up and below.

by the way, the insinuations and assumptions contained in the report you copied and pasted above (link/source does not work) are not only completely wrong but in my [not so] humble view ludicrous pure BS. anybody who follows closely what's happening in China knows that.

i am sorry to hear about your dogs.

[thaimate]

Is China's meltdown starting

YAWWWWNNNNN...

If you have nothing to say ,best to say nothing at all ,hope the dogs get better

[Naam]

Is China's meltdown starting

YAWWWWNNNNN...

If you have nothing to say ,best to say nothing at all ,hope the dogs get better

this is what i had to say:

by the way, the insinuations and assumptions contained in the report you copied and pasted above (link/source does not work) are not only completely wrong but in my [not so] humble view ludicrous pure BS. anybody who follows closely what's happening in China knows that.

[hawthorne]

You asked the question if China is in bubble mode. Just because it is in the bubble mode does it mean the balloon is half full or about to pop? If you had a bubble pop at this time it would not be a dramatic drop as in Japn 20 years ago because Japan was a matured market or like Dubai which was building beyond its own population.

There will always be market corrections. Look at this in the macro and see how long China has been a major global exporter. The massive cheap labor. China is a new economy and like any business that grows too fast their will be problems.

Now what is your investment strategy? short player, direct investor in china through funds, certainly not a currency trader as China keeps its currency devalued for exporting, commodities or what. if you are market timing and you ask a board for information or opinions, we could all be emailing from the asylum. Never ever take financial advice from anyone (especially a broker). Do the homework yourself. You work dam hard for the cash do not be in a hurry to give it away.

Maybe you are a seasoned investor just asking and in that case I apologize. I just do not want to see a young person take investing so lightly.

To the seasoned investor- I am invested heavily in china and have been for a long time. I will hang with it. I have no crystal ball but I love when a Huge Hedge Fund Manager comes out against my investment. Sure I start paying a little more attention. Yes multiples are a bit high. SO i rightfully expect a correction now or in the near future but IMHO not too big and I personnally would like to see the market stablize a bit. Get better multiples.

I am diversified so if it fell 75% it may give a bit of heart burn but I will sleep just fine. As long as the gov does not fall I would expect to see the market take care of itself and recover and be much higher than it is today. I am very long and continue to buy ever month. My money is where my mouth is but I do not know any more than the guy in the straight jacket sitting beside me.

good luck

[LaoPo]

OK, let me bite:

1. Bizz, your posts are difficult to determine which is yours and which is copy-and-paste

2. The China bubble is mainly in local real estate and housing.

This was created by the government since they installed, in 2008 already, gigantic stimulus programs to push local spending to make up for decreased exports.

That was such a huge success that everybody wanted a house, a car and other high prized items/computers/gadgets/furniture etc. and banks were stimulated as well to give out more loans.

Now that the stimulus programs worked so well, it was time to hit the brakes to stop over-consumption and loans for the last part of January; with the upcoming Chinese New year it's a good time to cool down the heating a bit.

How this will effect Thailand ?

Not very much.

LaoPo

[Publicus]

Yes the Shanghai Index is at, but only peeking over the 3,000 line, so there's some cause of concern but no reason whatsoever to head for the lifeboats. It's not the first time for the index and so far it's a managable level of risk as the index hasn't ever spent much time at or greater than the 3,000 benchmark of danger.

The real risk to the PRC economy and society is the wearing off of the stimulus. The PRC, Thailand, Asean countries still have to develop a long term strategy to deal with the real movement in the US to reduce its level of consumption from the recent high of 72% to the more typical 65%. That's a permanent difference/loss of several hundred billion USD to these economies which equates to enormous amounts of baht or RMB.

Too much of the stimulus was anyway thrown willy-nilly at Communist Party Officials, their families, relatives, cronies etc which is a major reason for the cessation of the lending party and festival in the PRC. Come the end of February and the end of the lunar new year and spring festival holidays, economic and financial realities will again pounding on the door.

It's fortunate for Thailand and Asean that the free trade agreement with the PRC was only recently concluded. Had the PRC had more time to further integrate Asean economies with the PRC economy, Asean countries would very soon be in deep rice.

[jcon]

I happen to be in Shanghai at the moment. I forgot just how huge this city was. I don't have much input on the "bubble" but I can say that there is A LOT of money flying around this town. And yes, there has been a lot of real estate construction as well. More high-dollar cars on the road than I've ever seen (I like cars, so maybe I just notice this more than your average person).

I have no idea what the future will bring, but I hope it brings some etiquette....

[midas]

Interview With Chinese Commercial Real Estate Developer Just Screams Bubble

To say that a collapse in Chinese real estate prices would be devastating is an understatement. A slowdown and asset collapse in China would be potentially catastrophic for the global economy which has become largely dependent on China during this weak recovery. Attached are a few highlights from the interview:

http://www.businessinsider.com/interview-w...s-bubble-2010-2