China’s manufacturing grew at the fastest pace in a year. We follow the government’s Purchasing Managers’ Index (PMI) closely, as we believe it is a better indicator of China’s domestic demand than the separate HSBC PMI. Whereas HSBC PMI surveys 400 small and mid-sized companies, which are typically export-oriented, the government’s PMI surveys 820 mostly large, state-owned enterprises across 20 industries.
Though manufacturing activity exceeded analysts’ estimates, some China bears focused on the fact that the March 2012 number is lower than the average during the third month from 2005 through 2011. What’s important for investors to consider is that the trend is your friend: It is the fourth month in a row where the PMI landed above the three-month PMI, and shows the economy is on the right path.
Below are three additional constructive trends we see in China.
1. China Returns Poised to Revert to the Mean
Over the past few years, Chinese stocks have lagged compared to their emerging market peers. Just pull up a chart of the FXI, EEM, EWZ and EWW. However, the Periodic Table of Emerging Markets perfectly illustrates how last year’s loser can be this year’s winner. Historically, every emerging country has experienced wide price fluctuations from year to year. Over time, though, each country tends to revert to the mean.
In the visual below, we highlighted China’s performance pattern over the past 10 years. Chinese stocks landed in the top half four out of 10 years-2002, 2003, 2006 and 2007. In 2003, China climbed an astounding 163 percent; in 2007, it was the top emerging market again, returning nearly 60 percent.
Since then, the country has fallen to the bottom half of the chart. If you apply the principle of mean reversion, history appears to favor China landing in the top half during this Year of the Dragon.
2. Liquidity Cycle Could Benefit Stocks
Yet China leaders won’t leave its success to pure luck. If the Dragon doesn’t breathe fire into markets, it may be a shot of liquidity injected by policy easing that could drive stock prices higher. Macroeconomic theory states that when a country’s money supply exceeds economic growth, the excess liquidity tends to drive up asset prices, including stocks.
BCA Research documented this trend in China over the past eight years. The research firm compared the difference between the change in money supply growth and nominal GDP growth and Chinese stock prices. In both instances when the change in excess liquidity fell to a low, so did stocks. Conversely, the rise of money supply growth compared to GDP growth “coincided with major rallies” for China’s stock market, according to BCA.
3. Incentive to Maintain Growth
BCA hedges China’s possible stock advancement in the short-term if signs of economic improvement continue because they “reduce the odds of aggressive policy easing.” A few weeks ago, I discussed how investors seemed to overlook China’s focused macro policy strategy, with its actions deliberate and purposeful. This year, the government has extra incentive to sustain meaningful growth as it transitions to a new leadership by the end of the year. As President Hu Jintao and Premier Wen Jiabao depart, Xi Jinping and Li Keqiang are expected to take over.
Looking at historical GDP growth per year since 1978, Deutsche Bank finds there’s precedence for this idea. During the fifth year of the leadership transition cycle, “high or stable” GDP growth was maintained, with the exception being the Asian Financial Crisis in 1997.
When I was in Singapore at the Asia Mining Congress last week, I was fortunate to be among a group of sharp and intelligent experts across the financial and mining industries. A China bull presenting an excellent case for the country was Jing Ulrich, JPMorgan Chase’s managing director and chairman of China equities and commodities group. She’s the Oprah Winfrey of the investment world, as for the past three years, Forbes has ranked her among the 50 Most Powerful Women in Business.
Ulrich expressed similar views toward China and its political will in a recent “Hands-On China Report” following her attendance at the China Development Forum in Beijing. She said that the government ministers emphasized their commitment to rebalancing the economy toward consumption.
While “fundamentals are currently sound, the nation must modify its ‘imbalanced, uncoordinated and unsustainable’ course of development,” says Ulrich. What investors should remember is that the government had the financial resources to effect this change and considered it important to maintain sustainable growth.
************************************************************* ON THE PERSONAL LEVEL, every country -- developed, developing and under-developed -- all have their fair share of tragedy. I hope my ER WILL PONDER THE WORLD at this human level, and then we discern the state of the human condition varies widely in EVERY COUNTRY. Let's read more/aMore? fom The Malaysian Chronicle...NO< I am not a shareholder or a staff of this two-year-old news portal, but I do contribute some Commentaries once a w'ile, esp when RPK stirs up some shitpot w'ile hyding ooouch in London, where I hear the Bridge, and some blokes, are falling down!:( OR :) your democratic eye-spot! -- YL, the newsdog, Desi, BUMmber knottyaSsusual
CHINA - A woman is in critical condition and her two daughters down with kidney failure after she poisoned herself and three children with pesticide because she could not cope with the pressures of living.
According to Chongqing Commercial News, Tang Chengfang, 27, added pesticide to sugar and fed it to her two daughters, aged five and seven, and her 8-month-old son.
The family had been left in Dazhu county, Southwest China's Sichuan province, while their father Li Heyuan was working away as a carpenter in Fuzhou, East China's Fujian province. She then consumed the lethal concoction herself.
Tang Xuemei, a doctor at the Children's Hospital of Chongqing Medical University, said all three children are unable to eat food and can barely speak because their throats have been seriously damaged.
Li said in the second year of their marriage in 2004, his wife had once threatened to commit suicide because she had a headache.
He didn't blame his wife, only saying she might be too tired to bring up three children.
"She may have depression," he said. Rao Chaoqiong, wife of Li's elder brother, said he thought Tang a good mother who treated her children well.
"Even if she only had one yuan, she would spend it on her children," she said.
Li makes 3,000 yuan (S$597) per month and until Tang gave birth to their third child last year, they all lived together in Fuzhou.
After giving birth, Tang returned to Dazhou, to take care of their three children.
Li spends several hundred yuan and sends the rest of his salary to his wife.
"I only want my family to be happy...I hope my children can make it. I don't know what to do without them," Li told local media.
Li has reportedly received more than 120,000 yuan in donations from the local government, a charity website and anonymous helpers.
-China Daily/Asia News Network
AND spanning two neighbours of ASEAN, Malaysia-Thailand, tourists must take heed of the "RSIKY" destinations:(~~~~
HAT YAI- A contractor has claimed the body of Low Thian Hock, the blacksmith from Kubang Ulu in Bukit Mertajam, Penang who was killed in the bomb blast at Lee Gardens Plaza Hotel here on Saturday.
Low Tiang Beng, 56, arrived here about 9am and was accompanied by two officers from the Malaysian consulate-general in Songkhla to identify Thian Hock’s body at the Songkhla Nagarind Hospital’s mortuary.
Speaking to reporters, Tiang Beng, who is Thian Hock’s eldest brother among five siblings, said he was positive the body was his brother’s.
He said some personal documents, including Thian Hock’s Malaysian identity card, was found on his body when Thai authorities recovered it outside the hotel-cum-shopping complex, a popular spot among Malaysian and Singaporean tourists here.
The soft-spoken and Tiang Beng said said several Penang policemen went to his house in Kulim, Kedah to inform his (Tiang Beng’s) wife that the Thai authorities had recovered some personal documents, including a Malaysian identity card, belong to one Low Thian Hock of Kubang Ulu, in Bukit Mertajam, Penang at about 2am on Sunday.
“I was in Kuala Lumpur then and my wife immediately contacted me.
“I left for Hatyai by midday but spent the night in Changlun, Kedah before arriving here today,” he said.
Once he reached Hatyai, Tiang Beng was met by two consulate officers, Mohd Nasir Awang and Anbalagan Arumugam, who later drove him to the mortuary.
Appearing somber, Tiang Beng said he was not aware that Thian Hock was in Hatyai.
“We spoke over the telephone on Friday on preparations for Cheng Beng (all souls’ day) but my brother said he was quite busy now.
“That was the last time we spoke to each other and now he is gone,” he said.
Thian Hock leaves behind a wife and three children, aged between six and 15.
- New Straits Times
Tuesday, 03 April 2012 06:47
BLOODY SCENE: Gunman slaughters six students at religious school
A GUNMAN opened fire at a Christian university in California today, killing at least seven people and wounding three more, authorities said.
The shooting erupted at 10.30am at Oikos University in Oakland. Police say they have a suspect in custody.
One witness to the shooting - a girl with a coin sized bullet hole in her arm - said the gunman rose up in class and started shooting, Sky News reported.
Pastor Jong Kim, who founded the school about 10 years ago, told the Oakland Tribune that he heard about 30 gunshots in the building. "I stayed in my office," he said.
Angie Johnson told the San Francisco Chronicle that she saw a young woman leave the building with blood coming from her arm and crying: "I've been shot. I've been shot."
The injured woman said the shooter was a man in her nursing class who got up and shot one person at point-blank range in the chest before spraying the room with bullets, Ms Johnson said.
"She said he looked crazy all the time," Ms Johnson said the victim told her, "but they never knew how far he would go."
Oakland police spokeswoman Johnna Watson said 10 people were hit by gunfire. Seven are now confirmed dead, three others are injured.
The attack set off a manhunt that ended about an hour later with the suspected shooter's arrest at a shopping mall.
Officer Watson did not give any other details about the detained suspect.
Authorities earlier described the gunman as a heavyset Korean man in his 40s wearing khaki clothing. "I can confirm that we do have one person who has been detained that we believe is possibly responsible for this shooting," Ms Watson said.
Television news footage showed a chaotic scene as heavily armed officers swarmed into the building in search of the shooter. The footage also showed bloodied victims on stretchers being loaded into ambulances.
As the gunfire rang out, terrified students ran from the building. SWAT units smashed glass windows with sledgehammers to reach the students and faculty.
KTVU-TV reported that the shooter was a student and opened fire in a classroom.
According of its website, Oikos University offers studies in theology, music, nursing and Asian medicine. Phone calls to Oikos were met with busy signals overnight and its website was slow.