Friday, 25 July 2014

Asia today - Japanese inflation, New Zealand confidence levels, arbitrage in China and AIA's excellent results

Asia today starts with Japan where the VAT hike included consumer price index number fell back slightly from 3.4% to 3.3% whilst the core measure also slightly rolled over to 1.3% as shown in the chart below (from Fast FT):

You know my thoughts on Japan - and these inflation statistics are consistent with this - more stimulus needed otherwise they will not make that 2% (non VAT influenced) inflation target at the core of Abenomics.

Interesting on New Zealand this morning that following four interest rate hikes this year:

'A survey of business opinion produced by ANZ produced a reading of 39.7 for July, its lowest since April 2013'

That's the trouble with interest rate will hit confidence levels following such a long period of time of ultra-low rates.

I was interested to read on Bloomberg (link here) in an interview with legendary investor Mark Mobius of Templeton that reforms at Chinese state owned companies are 'the biggest game in town'.  Previously I have noted the arbitrage valuation differentials between Hong Kong and China listings and I was interested to see that the Bloomberg article reiterated this by quoting a specific company statistics:

'PetroChina shares in Shanghai are valued at levels 12 percent lower than those listed in Hong Kong and reached a record discount of 13 percent this week. China Petroleum & Chemical Corp. (386) is 17 percent cheaper on the mainland, while Agricultural Bank of China Ltd. trades at an 18 percent discount'

Sometimes though the companies may not be fully helping themselves.  For example this report on Reuters noted that:

'PetroChina is reconsidering a plan to auction off its multi-billion dollar natural gas pipeline unit, and could instead sell it to an affiliate...Selling PetroChina Eastern Pipelines Co Ltd to the affiliate, 50 percent owned by PetroChina, would enable China's largest energy producer to maintain control over the national gas grid as well as raise cash to fund oil and gas exploration...But scrapping the auction would pose a setback to the government's plans to open up the state-dominated energy sector to domestic private investors to improve competition and rein in corruption'

One company outside the state owned enterprise zone is AIA the pan-Asian insurance company.  Reading through the half-year results today I was struck by the 15% rise in operating profit after tax and the dividend yield.  Remains a strong structural growth story...

...and pleasingly given I am a shareholder the shares have moved to a new all-time high:


  1. Evidently the Chinese haven't discovered arbitrage yet. Hard to fathom no one exploiting the price discrepancies between Shanghai and HK.

  2. Only certain people allowed to trade between the links and ultimately equivalence improves this will disappear largely IMO. Let's face it though, Billiton or Rio Tinto London vs equivalent in Australia even FX adjusted sometimes as a deviation of two!