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ARE CHINA’S BUBBLE FEARS OVERBLOWN?

3 November 2009 by TPC 6 Comments

Bloomberg’s Chart Of The Day shows that China’s loan growth might not be as bubbly as some presume:

The CHART OF THE DAY shows deposits at the four largest listed banks grew by 4.3 trillion yuan ($630 billion) in the first half of 2009, according to data from company filings compiled by Bloomberg. That’s more than the 3 trillion-yuan increase in loans from the same banks, Bloomberg data show.

The steeper rise in deposits suggests many state-owned Chinese companies haven’t spent their loans yet, said Henderson’s Andrew Beal. The money manager’s view contrasts with warnings from CLSA Ltd. strategist Christopher Wood and former Morgan Stanley economist Andy Xie that borrowed money may be spurring asset bubbles. The Shanghai Composite Index jumped 69 percent this year, while home sales surged 73 percent in the first nine months of 2009 from a year earlier.

Predictions that most of this year’s new lending by banks “has gone straight into the economy, equity markets and property markets don’t tell us the facts,” said Beal, who helps manage $3 billion as Henderson’s director of pan-Asian equities in London. “Most of that went straight back to deposits.”

Read the full story here.

Source: Bloomberg

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6 Comments »

prescient11 said:

I agree with this TPC. Difference is that China is blowing a bubble WITH MONEY THAT IT HAS. We are not.

Still waiting for your thoughts on the rare earths. Chinese minister said China should use its foreign reserves to stockpile rare earths. I think Dines is on to something here. There are only so many companies with significant proven reserves.

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TPC Reply:
November 3rd, 2009 at 10:11 PM

I must have missed your comments on rare earths. What did you want me to look into?

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prescient11 Reply:
November 3rd, 2009 at 11:07 PM

My friend, just curious as to your thoughts on the space, if you had any.

Very intriguing. I am invested here in a lot of the Canadian juniors. Long term, 3 years, I think we are into something big here.

And I started looking into it based on Dines initial interview which you posted here and the draft memo from the Chinese stating they intended to restrict supplies.