Archive for the ‘chinese economy’ Category
China: The New Breeding Grounds for Capitalism
By George Leong, B.Comm. for Profit Confidential
China’s economy is slowing, but the rich in that country continue to get richer and are growing in number. I was reading the other day that Chinese investors are now some of the biggest purchasers of high-end real estate in the United States—Manhattan, in particular. It would not be a surprise to see a buyer from China lay down $10.0 million cash for a Manhattan loft after their first visit. Trust me: the money out of China is staggering and will only grow bigger.
Yet the super-rich may surprise you. Out of the approximately 200 billionaires in China, about 83 are politicians, so you know who really runs the country and is getting rich. (Source: Anderlini, J., “Chinese parliament holds 83 billionaires,” Financial Times, March 7, 2013, last accessed June 17, 2013.) That’s unbelievable, and you know that these wealthy politicians probably can do whatever they desire, worrying very little about any conflict of interest.
China also has about 1.3 million millionaires—which trails the United States at 5.9 million and Japan at 1.5 million, according to the Boston Consulting Group. (Source: Barris, M. and Jing, S., “China to Top Japan in millionaire stakes,” China Daily, June 1, 2013.)
For Father’s Day, you can satisfy your appetite with a three-course dinner at Morton’s at The Regent Hotel in Beijing for US$135.00, or how about champagne, wine, and beer for $80.00 each at the Senses Signature restaurant at The Westin Beijing.
But while the country is seeing a renaissance in wealth creation at a pace never seen in the history of the world, the fact is that 70% of … Read More
Why There May Be an Insatiable Appetite for Chinese IPOs
By George Leong, B.Comm. for Profit Confidential
The Chinese are coming! Well, not really, but we did see the first Chinese initial public offering (IPO) of the year list on an U.S. exchange yesterday and only the third Chinese IPO since 2011. The pipeline has dried up from the 60 or so Chinese IPOs listing in the U.S. from 2008 to 2011. And whether the flow will start again is questionable, as I doubt it will happen.
China-based shopping center LightInTheBox Holding Co., Ltd. (NASDAQ/LITB), an online seller of apparel and other household goods to the world market, is the top Chinese online retailer as far as sales to customers outside of its country’s borders. The company, sometimes seen as the little “Amazon.com” of China, was started by Alan Guo, who was previously an executive at Google China. The company priced 8.3 million shares at $9.50 (the mid-point). The deal was hot due to the absence of IPOs coming from China. The stock surged 34% to an intraday high of $12.69 prior to settling at $11.61 for a market cap of about $470 million.
The strong buying in LightInTheBox indicates the demand for Chinese IPOs that are deemed to be trustworthy. The other two Chinese IPOs that debuted in 2012 have done well—online discount retailer Vipshop Holdings Limited (NYSE/VIPS) and social media company YY Inc. (NASDAQ/YY) are up a whopping 340% and 150%, respectively, from their IPO debuts.
At issue have been the numerous cases of fraudulent financial reporting by Chinese companies listing in the U.S., since these companies were not subject to U.S. reporting requirements with many listing on the bulletin board and … Read More
Chinese Economy Finally Slowing; What It Means for Its Stocks
By George Leong, B.Comm. for Profit Confidential
Chinese stocks continue to be major underperformers this year—they have been for the past three years from 2010 to 2012. I must admit that having been a bullish supporter of Chinese stocks, it has been a major disappointment; but like everything in life, things will surely get better. I’m just not putting a timeframe on when Chinese stocks will regain their glory and outperform.
At this juncture, there is no evidence that the landscape for Chinese stocks will improve soon. The Shanghai Composite Index (SCI) is up a mere 2.12% this year, easily underperforming the S&P 500 and the Dow. Even the Nikkei 225 has blown away the SCI.
Just take a look at the comparison in the chart below of the SCI (as indicated by the red candlesticks) and the S&P 500 (as indicated by the green line). The purple oval on the right side of the chart shows the divergence forming between the SCI and the S&P 500 since around 2008, based on my technical analysis.
Chart courtesy of www.StockCharts.com
In the short- to medium-term of less than one year, the SCI will likely continue to underperform the U.S. key stock indices.
For Chinese stocks to come back, two things must happen:
First, China must make sure the Chinese economy doesn’t falter back into a tailspin. The new government, under President Xi Jinping and Premier Li Keqiang, must work to drive domestic consumption in the country to levels similar to those in the United States and Japan, where consumer spending accounts for about two-thirds of the countries’ gross domestic product (GDP). In China, domestic consumer spending currently only … Read More
If the Shanghai Composite Index Is a Leading Indicator, Watch Out!
By Michael Lombardi, MBA for Profit Confidential
Export-oriented provinces in the Chinese economy have turned pessimistic and anticipate exports will only grow at the rate of five percent this year. In 2012, they targeted an export growth rate of eight percent to 10%.
What’s troublesome about this is that exports from the Chinese economy account for 20% of the country’s gross domestic product (GDP). This means that, if exports from China to other countries decline, the Chinese economy will suffer an economic slowdown. (Source: Epoch Times, February 7, 2013.)
The Chinese economy has become fragile due to the economic slowdown in the global economy. Its biggest trading partner, the eurozone, is still suffering, while other areas have anemic demand.
As export volume falls in China, it is creating trouble for China’s manufacturing sector. The Chinese Purchasing Managers’ Index (PMI) declined to 50.4 in January from 50.6 in December of 2012. (Source: National Bureau of Statistics of China, February 1, 2013.) A reading above 50 means expansion in manufacturing, while a reading below 50 means contraction. January’s reading is not far from the pivot point into manufacturing contraction.
Getting a read on the Chinese economy is not that easy. Some say statistics out of China are not that reliable. But here is the official word from the Chinese government: in the third quarter of 2012, GDP in the Chinese economy rose 7.4% from a year earlier—the slowest growth rate in three years. (Source: China Daily, December 30, 2012.)
While time and more data will make the picture clearer, with Chinese exports stumbling, a contraction in manufacturing activity could be next for the Chinese economy.
And it’s … Read More
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