Tuesday, 29 July 2014

Asia today - wealth build up, the Chinese consumer and property market, poor Japanese retail sales...and India & smartphones

Asia today has to start with this chart from the Swiss wealth manager/investment bank UBS whose new client flows show once again the rise in importance of Asia...

A very important announcement from Want China Times with the observation that:

'In China, consumption now contributes more to GDP growth than investments and exports. Consumption accounts for 54.4% of China's economic expansion, while investments account for 48.5% and exports account for -2.9%, according to data from China's National Bureau of Statistics. Consumption grew 11% during the first half of this year in China, higher than the economic growth rate for the same period, according to bureau data'.

Now partially this is due to specific quarterly data BUT the trend is more than established.  The rise and rise of the Chinese consumer continues.  That is why my stock picking in the region (currently companies such as AIA, Chow Tai Fook, SJM Holdings) are focused on this theme.

Two further interesting China stories.  We are always told 'location, location, location' with regard to property choices, well this report appears to agree (link here).

'Home prices are falling across China, but there is one exception: those in coveted school districts. So while property values sag in most major cities, prices for so-called “school-district housing” is going in the opposite direction — drastically'.

Another interesting report is this one which highlights some building risks in the 'new style' Chinese banking system (which is largely 'owned' by the largest technology names!) as maturities lengthen in the search for yield.  Let's hope they are not borrowing short...and lending long.

Turning to elsewhere in the region this report on Bloomberg notes

'Japan’s retail sales fell more than forecast in June, capping a weak quarter that challenges Prime Minister Shinzo Abe’s bid to reflate the economy while heaping a heavier tax burden on consumers. Sales dropped 0.6 percent from a year earlier, the trade ministry said in Tokyo today, steeper than a median forecast for a 0.5 percent decline in a Bloomberg News survey. In the second quarter, sales slumped 7 percent from the previous three months.' 

Not good...and Fast FT citing some Credit Suisse analysis takes it one stage further:

'Real consumption expenditure recovered only modestly in June (+1.5% mom) after two consecutive months of contraction in May (-3.1% mom) and April (-13.3% mom).

Real retail sales came in flat in June (0.0% mom) after a 3.9% mom increase in May (-18.8% mom in April)

In qoq terms, real retail sales in 2Q were -11.1% qoq (before annualized) after +4.8% qoq in 1Q, even worse than the real household consumption data 

This makes the post-tax increase sales slump, in their view, look worse than in 1997. '

More stimulus required in Japan...

Finally, the rise of the Indian smartphone market...but where is Apple?

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