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 : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (62781)	4/15/2010 2:25:31 PM
From: Elroy Jetson	9 Recommendations Read Replies (3) \| Respond to of 219525

With 60% of China's economy derived from constructing empty buildings largely sold to speculators, you're in a bubble with immense amounts of capital actively being destroyed. Japan destroyed much of their capital reserve in exactly the same manner. Nor did immense reserves of foreign currency and foreign debt help the United States in 1929. It didn't really matter that the 1920s bubble in US stocks and real estate was financed with local savings. Malinvestment merely is malinvestment. Initially it looks similar to prosperity, but the end result is quite different. .

To: TobagoJack who wrote (62781)	5/22/2010 10:23:12 AM
From: KyrosL	2 Recommendations Read Replies (1) \| Respond to of 219525

Chanos may be wrong longer term, but so far his trade is working. Even if he closes his trade now, he will do very well. China's Property Market Braces for the Bear By LESLIE P. NORTON \| MORE ARTICLES BY AUTHOR(S) China property prices could sink 30% -- along with real-estate stocks. THE BEAR MARKET IN RESIDENTIAL PROPERTY in mainland China finally seems poised to begin. After the Chinese government enacted a raft of measures to cool real-estate speculation, sales volume is slowing markedly. One prominent developer thinks residential real-estate prices on the mainland could fall by 30%. Beijing is "hitting the market really hard, coming in with double barrels," Ronnie Chan, chairman of Hang Lung Properties (ticker: 0101.Hong Kong) and Hang Lung Group (10.Hong Kong), said last week in an interview in New York. Prices could decline "by 20% to 30%, or even more" from current levels, says Chan, adding that "I hope [the market] won't go down by 50%, but it's anybody's guess." In the downturn, in 2008, residential real-estate prices fell by up to 40% in the Pearl River Delta. The decline is likely to vindicate outspoken critics of China's asset bubble, including short seller Jim Chanos; hedge-fund manager George Soros; and Edward Chancellor of Boston's money-manager GMO. Property shares have fallen about 25% from an October peak, after China's central bank boosted reserve requirements. Beijing also insisted on bigger down payments for second homes, and prohibited loans for third homes, after bank lending soared last year, with an estimated 20% going to fund real-estate purchases. Goldman Sachs and Credit Suisse reduced their forecasts last week for Chinese real-estate-company earnings, and predicted 30% price declines on residential property. Sentiment is so poor that Hong Kong-based Swire Properties recently pulled its $2.7 billion initial public offering. Credit Suisse analyst Jinsong Du reports that local property brokers expect 20% declines in the secondary market. While prices "are largely unchanged," sell-through rates fell to 20% and 40% early this month, from 60% to 70% previously. Price cuts could start in the second half. Chan expects property-price declines to cool consumer sentiment and the Chinese economy, although a high savings rate will mitigate some fallout. "There will be a slowdown," he says. "This will put pressure on balance sheets of individuals and companies. Real-estate companies will have a hard time. The natural expectation is it would reduce gross-domestic-product growth. The wealth effect is a factor." Real-estate investment is 12% of GDP. Beijing is pushing on the brakes because the property market has grown "irrationally exuberant," Chan relates. The government's stimulus package "bailed out the property market, but also bailed out property developers...which created a moral dilemma in which they were privatizing profits and nationalizing losses," he says. CHINESE REAL-STATE STOCKS COULD fall by another 10%, although developers are in healthier shape today than in 2008, says Mark Konyn, Asia Pacific chief for Allianz RCM. About 40% of Hang Lung's assets are on the mainland, mostly in commercial real estate, including Class A retail properties. The rest are in Hong Kong, where Hang Lung is strong in the residential market. Chan thinks the retail market will stay robust, and that any declines would create buying opportunities. "It may slow down, but it was very strong last year," he says. "Our rent was up 24%. If that goes down to 20%, it's not the end of the world." He is looking for properties in a number of cities, such as Chengdu and Hangzhou. Hang Lung Group's shares have fallen 8% from its October peak to 38.55 HK ($4.94), and the decline is starting to draw investors. Brett Johnson, chief investment officer at Grubb & Ellis Alesco Global Advisors, which runs Grubb & Ellis AGA International Realty Fund (GBEWX), likes Hang Lung's net cash position of HK$2 billion-plus. Shares are trading for 15 times 2011 forecasts, while net asset value ranges between HK$27 and HK$37 a share. It is "very attractive," says Johnson. "I am a huge believer in the China retail story and they have a terrific portfolio." online.barrons.com