Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (13917)	10/23/2004 8:03:54 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Here are some translations from China State Construction Ministry’s report. The main theme is there is no sign to say there is a real estate bubble in China. The potential hosing demand in China Currently, there are 490 million urban dwellers. By 2020, urban dwellers will grow to 800-850 million. So there will be 300-350 million fresh new demands for housing. The demand from improving of the current housing condition: the current per capita housing in cities is 23.8 square meters. According to international development trend, it is estimated by 2020, the per capita housing could go to 35 square meters in cities. The true housing demand, let’s assume only 20% of the current urban households (about 27 million) wants to increase 20 square meters of housing each, that will total to 540 million square meters. This demand can already be currently guaranteed by people’s savings or partial loan from the government. Dynamic demandThere were 97 million square meters commercial residential housing available by the end of August, 2004, comparing with August 2003, the vacancy was down 0.8%. Comparing with the vacancy at the end of 2003, it decreased 3%. These data tells the vacancy is not increasing. Vacancy has both negative and positive role. On one hand, it is a waste of investment, and may account for some bad debt; on the other, vacancy can balance out some price fluctuation of housing. One thing needs to be addressed is that the vacancy rate in China is not calculated according to the international standard, so it will not be appropriate to use the international warning standard of 10%. International vacancy rate is calculated by dividing the current vacancy by the total vacancy, while China’s vacancy rate is calculated by dividing the current vacancy by the current newly built housing. The denominator is different. And China uses a much smaller denominator, so the rate is always higher. The housing price decline will be very bad for China under the current economy when 72% of city dwellers already have their own housing. For those who still have large amount of outstanding loan, housing price decline may even mean negative asset. Main Reasons for the fast increase of the housing price in cities. Bet. April and June, 8 big cities in China have an increase of >10% in their housing price from the same time last year. 1) due to the fast increase of the land price; 2) due to the fast increase of the raw material and higher quality; 3) Although high demand plays some role in some areas, the fast price increase has more to do with some people/groups speculation. 4) Faster inflation also contributes to fast increase of housing price. The non-residential buildings are overheated and already become oversupplied. During the 1st three months this year, 9 provinces had an increase of >60% in their real estate development compared to the same time last year, and most of these are non-residential buildings. Housing price has a strong relationship with the expectation of the economy. Generally speaking, people still have a good expectation of China’s economy. As of now, China can still control its housing finance. In developed countries, the banking loan usually accounts for <40% of real estate development funding. While in China, banking loans count as high as 60% of funding for real estate development. However, unlike developed countries, where around 40% of the housing value is paid by mortgage, most of older apartments in China are paid completely by cash from owners. Mortgage is a relative new concept in China, so they are all on the housing finished in these couple of years. Thus, in case of bankrupting, the bank has higher asset value. Financial risk for housing has a close relationship with the general economy. Housing bubble burst in 1997 after Asian currency crisis was only a consequence, not a cause. The cause of Asian currency crisis was due to inability of paying interest/short-term debt by those nations. Furthermore, what busted was not the real estate bubble, but the expectation for their economy. So it is not true to consider the real estate bust was the cause of Asian currency crisis. As long as China’s economy can keep developing at a decent speed, as long as real estate in China does not have an overall overheat, there would be no worry about so-called “real estate bust”. ...

To: mishedlo who wrote (13917)	10/23/2004 8:09:25 PM
From: RealMuLan	Respond to of 116555

China demand for oil, in the near future, some increase, but won't be as fast as the last 7-8 months, long term goal for China is to reduce the dependency on imported oil to 25% Soybeans, should be strong Copper, I heard some SOE's just lost big in copper trading recently. Personally, I think with China still implementing macro-economic control, the demand for steel and copper should increase very little. But please don't think I know anything, I am just here to talk nonsense<g>

To: mishedlo who wrote (13917)	10/23/2004 11:16:02 PM
From: RealMuLan	Respond to of 116555

Mish, China demand for soybean, after I did a little reading, I have to reverse my last comment<g>. This year, soybean in China, as well as in the US, will get a big harvest, plus last year, China bought loads of soybeans from the US at a very high price, got burned and lost a lot of money, so China is very cautious this year. And thus expert predicts soybean market will not be strong. This year bet. Jan. and Sept., China imported 21.2% less of soybean comparing with 1-9 last year.