James Lewis

Hong Kong Real Estate Requires 40% Down

This issue is interesting because the housing bubble in Hong Kong is indicative of the amount of new USD being created through QE emanating from US, as well as the amount of RMB being created in China through the QE program otherwise known as 'mental reckless lending'.

Because of the size and openess of Hong Kong, it is immensively sensitive. Based on this, I dare say that Hong Kong is very much a leading indicator of what will occur in the west and in China later down the road. The USA needs this hyper-inflation. China based on its actions also seems to believe it is necessary. However with such huge reserves and less need to take writedowns at its financial institutions (as they are in effect government entities), I think China could end in a very uncomfortable hyper-inflation spiral that will ultimatly lead to stagflation. This will be especially true if the rich continue to hold such huge % of the wealth. China needs to eithr reduce liquidity (impossible as the Stimulus will not peak until next year at the latest) or spread the wealth. Asset Hyper-Inflation does not spread wealth, it just makes upper classes rich if they are smart enough to bail out in time at the expense of tax payers and savers.

All Eyes on Hong Kong then - my new leading indicator.

China's 'New Reality'

Sorry, as long as the trade surplus is growing - China is benefiting.
So if they manage to get a trade surplus increase in 2010, after the obvious boom surplus year they will have in 2009 (when its finished). Then they are doing very well. My bet is its a little stupid to estimate numbers like this, because if Europe and USA slap tariffs on chinese goods. Then there will be a very large deficit recorded. (China's fiscal spending will require a great deal imported commodities in 2010). My bet the reason why they are not discussing 2011 is because they take the stance that the USA/Europe will slap tariffs on China in 2011).

It scares me but I think the Chinese are trying to devalue the appeal of the yuan by printing lots more. So if there was a float, the rmb would decrease because it has been devalued domestically.
If the economic war is really being fought on this front, China needs to watch itself domestically.

After all its has specific policies to limit wage growth under real inflation. If food and property costs go up, the poor will be squeezed even more so than they are now.

There is no way that the Chinese can print money like they have been and real estate/stock market not massively inflate. I am very scared teh Chiense believe that Japan fell into their 20 year slump because of the plaza accord. Not because they tried to inflate to become the largest economy in the world.

interesting..

Floating Rate Mortgage in Hong Kong Is Setting Up a U.S. Style Housing Market Crash

If Andy Xie is right, we are all in a lot of trouble.
Andy Xie is very smart, but he is a bubble chaser.

The fact everyone is borrowing short to finance huge houses on variable rate deals is worrying. But the first 1% of interest rate rises will be absorbed if they are getting 4% net yield. And if the REAL economy (is there such thing in Hong Kong - LOL) is doing well (hopefully a pre-requisite for rate rises in USA) then rental income should rise and rental vacancy levels should drop.

If the real economy does not improve and the last 5 years of world economic growth (upto 2008) is unsustainable and can not be repeated again. Then we are potentially sitting on a mess that will take decades to work through. The whole world may have to be run like Japan, just to keep toxic balance sheets under control.

Hard Call....but short term I would like to borrow at 1%, rent at 4%.
And collect a nice capital gain as more mainland money is laundered through Hong Kong into property. The sad truth is, to make money through asset appreciation on the backdrop of the problems in the system. Playing short term is the only real way to manage risk. After all we all know, the only reason why most assets are not in the toilet is because the G20 governments have agreed to inflate them.

China's Energy Strategy: Panda or Dragon?

China is not a Dragon or a Panda.
It is 100% a Tiger in every possible respect.

In terms of energy security, China will go to any length even partnering up with their main competitor the USA.

China had a special secret deal with USA to back their activites going into Iraq in return for oil. In return they proved very useful especially in using its influence with Pakistan.

Global Returns: Stocks Down, Bonds Down

Trading Russia/Brazil is the same as trading commodities.
If commodities carry on their rise or stabilise then Brussia is the way foreward. You start getting a drop in oil etc, then China is the market to be in.

Shortly we will start to see PE ratios in the region of 13-15 in some stocks in China. That suggest that China will improve its dismal performace, we just need the market to capitluate.