Chinese Real Estate

More information can be found on ZeroHedge or more “traditional” media, but the quick bottom line is that real estate in China seems to be relatively positively correlated with its stock market (pictures 2 and 3).  Chinese equity seemed to have led slightly ahead the timing of the beginning of the bullish (bubblish) trend towards the end of 2014 as Chinese real estate in every cities from all 4 Tiers became buoyant soon after during the beginning of 2015. It must be stressed that most Chinese households hold nearly 75% of their wealth stacked in real estate, while American people have their wealth mostly invested in financial products (picture 1).

Source: ZeroHedge

Source: ZeroHedge

Shanghai Composite (Weekly): Compare the Chinese real estate and equity markets (March 11, 2018)

There are plenty of news related to Chinese real estate special situations and it is well known that the Chinese government attempted several times to curb down price. However, in January 2018, price tags started to decrease for the first time since May 2015 – which corresponds to the peak of the Chinese stock market bubble that became more apparent after the introduction of, you guess what, the European Quantitative Easing.

Source: ZeroHedge

Interestingly enough, soon after the Chinese president Xi Jin Ping  modified the constitution to become a potential “eternal” president, the drafting of a bill for property taxes in China was made public almost concomitantly. This coincidence appears to be too good and well-timed to be true. Are we finally sitting on the top of the cycles (fundamentally and technically speaking) as many “specialists” have already foreseen?

Xi Jin Ping’s focus on corruption crack-downs could have been extremely strategic so that opposing political powers and elites would be forced to step down. This could have given free reins to the man and its companions to keep the power and, ultimately, control market cycles in a global way.

It is also very noteworthy to mention that the Chinese Central Bank’s head Zhou Xiaochuan was replaced for the first time in 15 years on March 19, 2018 by Yi Gang, an US-educated Chinese man who also taught at Indiana University – Purdue University Indianapolis. Other institutional shifts and changes happened to appear almost concomitantly in China, such as the merger of bank and insurance regulators that would grant nearly all the power to its central bank.

Now, check the last update of the chart of Chinese equities after I wrote the first line on March 11, 2018:

S

Shanghai Composite (Weekly) as of July 9, 2018: More than -20% since its peak in January

The Chinese stock market has tumbled and lost more than 20% of its nominal value so far since its last peak of the year on January.

This market could become very bearish as already expected previously. Let’s see how everything will end.

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Another crunchy piece of news concerns the acceptance of the US president Donald Trump to meet the North Korean leader Kim Jong-Un. This setup was naturally not “random”, otherwise everything in life would be too simplistic and easy.

A fashion trend about Korea hype has been continuously building up for many years. Korean students are known to be working and studying really hard, despite some negative impacts that it brought up under the will of the Korean conglomerates (Chaebol) to control its people. This also helped the Korean to improve the country’s economy albeit all the sacrifices that have been made. The well-being of the country’s people is generally improving, and their Purchasing Power Parity will soon (in 2020?) be above those of the French and the Italian, according to the International Monetary Fund (IMF). Moreover, that increase in focus on Korea was further spurred by the 130th Anniversary of the French – Korean diplomatic relationship in 2016. Korean people are travelling around the world, especially in Europe, more than ever. That is the “new” Asia-Pacific trend.

Among too many other things, this naturally leads to the discussion on North Korea and the claim by many experts of the potential that it could create should it reunite with its old sister, South Korea.

Source: abcnews.go.com

One key word besides the meeting of the American and North Korean leaders is cycle timing. We do not know what will happen. Not yet. But there is in fact another extremely important point that has not been widely discuss so far: rare earth minerals are abundant in North Korea and China, especially one: Neodymium. Without delving into further details, it is said that Toyota has discovered a new way to create magnets for its hybrid cars that would be much cheaper and less dependable on this “rare-earth metal” which is also used in the construction of wind turbines, semi-conductors and so on. This “geopolitical” move is indeed clearly more economic than ever. The Olympic Games that were held in February 2018 in Pyeongchang, South Korea, are probably another good excuse.


https://uk.reuters.com/article/uk-toyota-magnet/new-toyota-magnet-cuts-dependence-on-key-rare-earth-metal-for-ev-motors-idUKKCN1G4132

Edouard CHANSAVANG

Edouard CHANSAVANG


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