Monday, November 23, 2015

Bloomberg: "Devaluation Watch May Force China to Pay Premium on Dim Sum Debt"

Fion Li.  Bloomberg.  November 22nd, 2015.
China is set to pay more to sell sovereign bonds in Hong Kong than in the onshore market for the first time, as investors brace for the possibility of another yuan devaluation.

The Ministry of Finance will sell 14 billion yuan ($2.2 billion) of Dim Sum notes in the city this week, including 2 billion yuan to individuals. The yield on offshore yuan securities due 2020 was 3.39 percent on Nov. 20, 25 basis points higher than debt of the same maturity in Shanghai, suggesting the government will have to pay more to borrow outside of the country.

Sunday, November 22, 2015

2015-10 Relative Price Trends

In October, consumer prices increased by 1.3% from the same month last year, and purchaser prices decreased -6.9% over the same period.  The rate for consumer prices was the lowest increase in five months, and the rate for purchaser prices was the lowest since 2009.  Based on this metric, the Chinese business cycle is in its 47th month of contraction.

Sunday, November 8, 2015

2015-10 Stock Market Valuation

The Chinese stock market bounced back in October to 0.28 gold ounces, up 0.04 ounces since the end of September.  It was primarily valuation driven, because the price-to-earnings ratio increased faster than the gold price.  Despite being down from the peak, the index is still up 46% over the last 12 months, and has seen positive growth for 34 consecutive months.

Sunday, November 1, 2015

2015-10 Relative Equity Performance

In October, the exchange traded fund tracking the consumer goods sector, CHIQ, fell -0.58% over the trailing twelve months.  The materials sector equivalent, CHIM, fell -10.79% over the same period.  This is the second month in a row that CHIQ has outperformed CHIM, and is close to being positive over the trailing twelve months.  This trend should continue if the cost of raw materials continue to fall at an accelerating rate while consumer prices are essentially flat.