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Chinese Econ Data Beats Across The Board: Retail Sector Grows For The First Time In 2020; Yuan Soars

Chinese Econ Data Beats Across The Board: Retail Sector Grows For The First Time In 2020; Yuan Soars

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Chinese Econ Data Beats Across The Board: Retail Sector Grows For The First Time In 2020; Yuan Soars Tyler Durden Mon, 09/14/2020 - 22:54

Following another month of strong, expansionary PMIs, the latest Chinese hard data joined the soft data in beating consensus expectations, with Beijing reporting its monthly data dump moments ago which saw continued improvement across all segments, with both industrial production and retail sales handily beating expectations.

China's The National Bureau of Statistics reported the following figures for August:

  • Industrial production came in at +5.6% yoy, above market expectations of 5.1%, and faster than the +4.8% yoy in July. Based on IP by major product data, cement production was up 6.6% yoy in August, faster than 3.6% yoy growth in July, while automobile production decelerated to 7.6% yoy, from +26.8% in July (when a favorable base effect contributed to the fast growth in automobile production). One thing to note - as Goldman points out, the sequential figures are highly sensitive to the specific seasonal adjustment methodology (NBS estimates +1.0% s.a. non-annualized in August, same as July).
  • Retail sales registered the first positive year-over-year growth this year, and was also better than market expectations: retail sales growth was +0.5% y/y in August, vs. -1.1% in July, stronger than the 0% expected print, with automobile sales growth staying strong at +11.8% yoy, vs. +12.3% yoy in July. This marked the first growth in the retail sector this year, with January and February’s data having been combined to account for distortions relating to the pandemic.
  • Fixed asset investment, the year-to-date value of spending on real estate, infrastructure and capital equipment, fell by 0.3 per cent from a year earlier in the first eight months of 2020, stronger than the -0.4% expected, and also an improvement from July’s -1.6% reading, as investment edges back towards growth following a collapse in the early part of the year.
  • The survey unemployment rates edged down in August, from 5.7% to 5.6%. However, while this is an indicator of the unemployment rate in a certain segment of the urban population, the SCMP notes that this is not viewed as an accurate depiction of the overall employment situation (one can technically say the same about virtually any other Chinese economic series).

"We think that China’s economic recovery is on a reasonably firm footing now and should continue through the fourth quarter and into 2021, with solid investment growth, gradually recovering consumption momentum and resilient exports," said Louis Kuijs, head of Asia at Oxford Economics.

What is strange, while shops, restaurants and entertainment venues were closed for much of the first quarter, even as they reopened, people have been reluctant to engage in the sort of spending the authorities might have hoped would kick-start the recovery. And yet, here it is in the economic data, clear as day. While things have been slowly getting better, with passenger car sales rising 9.0% in August from a year earlier, and continuing to grow strongly into the first weeks of September, according to the China Passenger Car Association, cinema box office revenue, however, fell 56.8% in August, according to the China Movie Data Information Network.

Of course, this being China, for the most part the "recovery" has been powered by traditional levers of growth: soaring exports and a booming construction sector. This trend continued in August with excavator sales – a proxy for construction work in China – rocketing 51.3% year on year in August, after growing 54.8% in July and 63.1% in the second quarter of the year. Meanwhile, as the SCMP notes, heavy-duty truck sales rose 74.7% in August, per industry data cited by Nomura, significant growth even if it was down from 89.0% in July.

Also curious: one day after China reported another monthly increase in housing prices, the NBS reported property development data that were mixed at best:

  • Jan.-Aug. property sales value rises 1.6% y/y to 9.69t yuan
  • Jan.-Aug. home sales value rises 4.1% y/y to 8.68t yuan
  • Jan.-Aug. property sales area falls 3.3% y/y to 985m sqm
  • Jan.-Aug. home sales area falls 2.5% y/y to 872m sqm
  • Jan.-Aug. new property construction falls 3.6% y/y to 1399m sqm

And in some good news for the battered commodities sector (and value investors everywhere), China’s apparent oil demand rose almost double digits, up 9.9% to 13.51m b/d in Aug.

While the yuan was already surging ahead of the news, having risen above the key level of 6.80 which has proven to be a strong resistance on numerous prior occasions, the offshore yuan was last seen at 6.7884, the highest print since May 2019.

While China may be delighted to demonstrate the yuan's strength, if purely from a political perspective, sooner or later, the deflationary aspect of the strong currency - especially in a world where global trade is still moribund - will soon start impacting the country which as we noted over the weekend, is injecting record amounts of credit to jumpstart a benign credit impulse and a global reflationary wave.

As Bloomberg's George Lei writes, "the offshore yuan’s advance this quarter is poised to be among the best ever since the currency started trading a decade ago. For the onshore yuan, its 3.72% gain so far this quarter represents the best performance since 1Q 2008. From a trading perspective, it is difficult to go against momentum for long and not lose money. Yuan shorts piled up - and then were crushed hard - when the offshore currency fell to a record low of 7.1965 per dollar on May 27, before rallying for the next few months. This time might be different for the currency’s momentum, however. Multiple warning signs have already flashed, pointing to at least a stall - and quite possibly a reversal - in the currency’s recent rally."

Perhaps, but judging by the latest strong economic data, that reversal won't be today.

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“We Are Headed For Another Train Wreck”: Bill Ackman Blames Janet Yellen For Restarting The Bank Run

"We Are Headed For Another Train Wreck": Bill Ackman Blames Janet Yellen For Restarting The Bank Run

Yesterday morning we joked that every…

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March 23, 2023

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"We Are Headed For Another Train Wreck": Bill Ackman Blames Janet Yellen For Restarting The Bank Run

Yesterday morning we joked that every time Janet Yellen opens her mouth, stocks dump.

Well, it wasn't a joke, and as we repeatedly noted today, while Jerome Powell was busting his ass to prevent a violent market reaction - in either direction - to his "most important Fed decision and presser of 2023", the Treasury Secretary, with all the grace of a senile 76-year-old elephant in a China market, uttered the phrase...

  • YELLEN: NOT CONSIDERING BROAD INCREASE IN DEPOSIT INSURANCE

... and the rest was silence... or rather selling.

Commenting on our chart, Bloomberg's Mark Cudmore noted it was Yellen who was "to blame for the stock slump", pointing out that "the pessimistic turn in US stocks began within a minute of Janet Yellen starting to speak."

The S&P 500 rose almost 1% in the first 47 minutes after the Fed decision. Powell wasn’t the problem either: the index was 0.6% higher in the first 17 minutes after his press conference started.

Why am I picking that exact timing of 2:47pm NY time? Because that is the minute Yellen started speaking at the Senate panel hearing. The high for the S&P 500 was 2:48pm NY time and it fell more than 2.5% over the subsequent 72 minutes. Good effort.

Picking up on this, Bloomberg's Mark Cranfield writes that banking stocks globally are set to underperform for longer after Janet Yellen pushed back against giving deposit insurance without working with lawmakers. He adds that "to an aggressive trader this sounds like an invitation to keep shorting bank stocks -- at least until the tone changes into broader support and is less focused on specific bank situations." Earlier, we addressed that too:

Looking ahead, Cranfield warns that US financials are likely to be the most vulnerable as they are the epicenter of the debate. Although European or Asian banking names may outperform US peers, that won’t be much consolation for investors as most financial sector indexes may be on a downward path.

The KBW bank index has tumbled from its highs seen in early February, but still has a way to go before it reaches the pandemic-nadir in 2020. Traders smell an opening for a big trade and that will fuel more downside. Probably until Yellen blinks.

And if Bill Ackman is right, she will be doing a whole lot of blinking in days if not hours.

Ackman crying in public

While we generally make fun of Ackman's self-serving hot takes on twitter, today he was right when he accused Yellen of effectively restarting the small bank depositor run which according to JPMorgan has already seen $1.1 trillion in assets withdrawn from "vulnerable" banks. This is what Ackman tweeted:

Yesterday, @SecYellen  made reassuring comments that led the market and depositors to believe that all deposits were now implicitly guaranteed. That coupled with a leak suggesting that @USTreasury, @FDICgov and @SecYellen  were looking for a way to guarantee all deposits reassured the banking sector and depositors.

This afternoon, @SecYellen walked back yesterday’s implicit support for small banks and depositors, while making it explicit that systemwide deposit guarantees were not being considered.

We have gone from implicit support for depositors to @SecYellen explicit statement today that no guarantee is being considered with rates now being raised to 5%. 5% is a threshold that makes bank deposits that much less attractive. I would be surprised if deposit outflows don’t accelerate effective immediately.

Ackman concluded by repeating his ask: a comprehensive deposit guarantee on America's $18 trillion in assets...

A temporary systemwide deposit guarantee is needed to stop the bleeding. The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back.

... but as we noted previously pointing out, you know, the math...

... absent bipartisan Congressional intervention - which is very much unlikely until the bank crisis gets much, much worse - this won't happen and instead the Fed will continue putting out bank fire after bank fire - even as it keeps hiking to overcompensate for its "transitory inflation" idiocy from 2021, until the entire system burns down, something which Ackman's follow-up tweet was also right about:

Consider recent events impact on the long-term cost of equity capital for non-systemically important banks where you can wake up one day as a shareholder or bondholder and your investment instantly goes to zero. When combined with the higher cost of debt and deposits due to rising rates, consider what the impact will be on lending rates and our economy.

The longer this banking crisis is allowed to continue, the greater the damage to smaller banks and their ability to access low-cost capital.

Trust and confidence are earned over many years, but can be wiped out in a few days. I fear we are heading for another a train wreck. Hopefully, our regulators will get this right.

Narrator: no, they won't.

Tyler Durden Wed, 03/22/2023 - 21:20

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China’s Auto Industry Association Urges “Cooling” Of Price War, As Major Manufacturers Slash Prices

China’s Auto Industry Association Urges "Cooling" Of Price War, As Major Manufacturers Slash Prices

Just hours after we wrote about maniacal…

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March 23, 2023

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China's Auto Industry Association Urges "Cooling" Of Price War, As Major Manufacturers Slash Prices

Just hours after we wrote about maniacal price cutting in the automotive industry in China, China's auto industry association is urging automakers to "cool" the hype behind price cuts.

The statement was made in order to "ensure the stable development of the industry", Automotive News Europe reported on Tuesday. 

The China Association of Automobile Manufacturers even went so far as to put out a message on its official WeChat account, stating that "A price war is not a long-term solution". Instead "automakers should work harder on technology and branding," it said. 

The consumer disagrees...

Recall we wrote earlier this week that most major automakers were slashing prices in China. The move is coming after lifting pandemic controls failed to spur significant demand in China, the Wall Street Journal reported this week. Ford and GM will be joined by BMW and Volkswagen in offering the discounts and promotions on EVs, the report says. 

Retail auto sales plunged the first two months of the year and automakers are facing additional challenges in trying to transition their business models to prioritize EVs over conventional internal combustion engine vehicles. 

Ford is offering $6,000 off its Mustang Mach-E, putting the standard version of its EV at just $31,000. Last month, only 84 of the vehicles were sold, compared to 1,500 sales in December. There was some pulling forward of demand due to the phasing out of subsidies heading into the new year, and Ford had also cut prices by about 9% in December. 

A spokesperson for Ford called it a "stock clearance". 

Discounts at Volkswagen are ranging from around $2,200 to $7,300 a car. The cuts will affect 20 gas powered and electric models. Its electric ID series is seeing price cuts of almost $6,000. The company called the cuts "temporary promotions due to general reluctance among car buyers, the new emissions rule and discounts offered by competitors."

Even more shocking is Citroën-maker Dongfeng Motor Group, who is offering a 40% discount on its C6 gas-powered sedan, now priced at $18,000. 

Kelvin Lau, an analyst at Daiwa Capital Markets, told the Journal that automakers are also trying to get rid of 500,000 vehicles collectively stored in their inventory, most of which are older vehicles that won't meet new emissions standards.

David Zhang, a Shanghai-based independent automobile analyst, added: “Some car makers have been seeing very few sales. At this rate, the manufacturers’ production and dealership networks will collapse.”

Tyler Durden Wed, 03/22/2023 - 18:00

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COVID origins debate: what to make of new findings linking the virus to raccoon dogs

New reports suggest the pandemic’s origins may be linked to raccoon dogs sold at Wuhan’s Huanan Wholesale Seafood Market. A virologist explains.

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March 23, 2023

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Voodison328/Shutterstock

The origin of SARS-CoV-2, the virus that causes COVID, has long been a topic of heated debate. While many believe SARS-CoV-2 spread to humans from an animal at Wuhan’s Huanan Wholesale Seafood Market, others have argued the virus was accidentally leaked from a lab at the Wuhan Institute of Virology.

Over the past week there has been intense activity surrounding the emergence of new data relevant to this question. In particular, reports emerged that the pandemic’s origins may be linked to raccoon dogs which were being sold illegally at the market.

The excitement stemmed from a re-analysis of raw data generated as part of official investigations into the role of the Huanan Wholesale Seafood Market in the outbreak.

The team of international scientists working on this re-analysis (from North America, Europe and Australia) alerted the World Health Organization and discussed the topic in an article published in The Atlantic. And the scientists themselves have now released a report on the issue, providing greater detail.

So what can we make of their findings? Will this development shift the course of the ongoing debate? Let’s take a look.

The Huanan market

In January 2020, writing about the emergence of what we now call SARS-CoV-2, I stated the importance of understanding how this pandemic began. It remains important to determine the virus’s origins because this knowledge may help us stop the next pandemic occurring.

Even very early in 2020, it was clear that the central Chinese city of Wuhan (a major metropolis and travel hub) was the epicentre of the outbreak. Within Wuhan, the Huanan seafood market stood out as it was associated with many – but not all – of the earliest cases. Indeed, the market was closed on January 1 2020, animals were culled, and the site was disinfected.

Suspicions arose given the role that animal trade and markets had played in the emergence of the closely related SARS-CoV-1 virus (which caused SARS, a widespread outbreak of viral respiratory disease) nearly two decades earlier. Evidence emerged that the Huanan seafood market also sold live mammals, including a fox-like mammal known as a raccoon dog, that we now know are susceptible to SARS-CoV-2.

Later epidemiological and genetic analyses further focused in on the market, and even specific stalls within it, as being the origin of the pandemic.

Read more: The original Sars virus disappeared – here's why coronavirus won’t do the same

The new data

As part of the official investigations into the market, swabs were collected from various parts of the market in the two months after it shut down at the start of 2020. The scientists who undertook this research, from the Chinese Center for Disease Control and Prevention, posted their analysis as a pre-print (a study yet to be peer-reviewed) in February 2022.

In this, the team concluded that the market likely played a significant role in SARS-CoV-2’s early spread, but that they couldn’t detect the virus in samples taken directly from animals. They reported that all the virus evidence found was associated with humans, and it was therefore likely the virus had been brought into the market by humans, not animals, and so perhaps the pandemic began elsewhere.

An illustration of SARS-CoV-2, the virus that causes COVID.
The origin of SARS-CoV-2 has been a topic of heated debate. Kateryna Kon/Shutterstock

However, prior to any official peer-reviewed publication, the raw data from this work was released on an open scientific database called Gisaid. And the group of scientists who re-analysed this data did actually find an association between SARS-CoV-2 and animals, in particular raccoon dogs in the market.

They found DNA from animals mixed in with SARS-CoV-2 in a number of samples from the market. Some positive samples contained no human DNA and mostly raccoon dog DNA. This mix of virus and animal material is consistent with an infected animal – not a human – shedding virus, which is what you might expect if SARS-CoV-2 originated from animals brought into the market. Unfortunately, samples from a living raccoon dog were either not taken or not reported, and the official investigation makes no mention of raccoon dogs.

Where to from here?

While this latest data is one additional piece of the puzzle that supports an origin of the pandemic linked to Wuhan’s animal trade, it is unlikely to provide irrefutable evidence. It’s important to note it’s also a pre-print.

Ideally, we would like animal samples from early December 2019, and to compare animal virus genomes with human ones. It will also be crucial to follow events backwards through the animal trade and farming systems to work out where the animals got the virus from in the first instance.

Further, we must bear in mind that the virus could have easily been given to a raccoon dog by an infected human, or that the association between raccoon dog DNA and SARS-CoV-2 may be coincidental.

Read more: We want to know where COVID came from. But it’s too soon to expect miracles

However, evidence is accumulating that official investigations have left a gap in their research – particularly around the role that animals like raccoon dogs and the wildlife trade played in the origins of the pandemic.

While it may be unlikely that we will ever get concrete evidence as to how SARS-CoV-2 entered the human population, we can still think pragmatically and seek to alter behaviour and practices to reduce the chance of a new pandemic. One immediate target would be food systems (encompassing farm to fork), and how to make farming and the wildlife trade safer for all, potentially by enhancing virus surveillance in animals.

Connor Bamford receives funding from Wellcome Trust, UKRI, SFI and BMA Foundation.

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