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It’s not exactly the sound of a bubble bursting. But China bears looking for further indications of a weakening Chinese economy could do worse than look at the results of Sotheby’s latest fine wine auction in Hong Kong.
According to Bloomberg, Sotheby’s has failed to sell all of the wine on auction for the first time in 17 sales. The biggest loser was Château Lafite-Rothschild – the Bordeaux wine that is most coveted by China’s super-rich.
How many ways are there to say “speculative bubble”?
Easily overlooked in the quarterly reports of banking statistics from the Bank for International Settlements are the tracks of money flows to emerging markets economies.
But the latest report, published earlier this week, includes a few eye-popping numbers.
The Beijing government has halted sales of the most expensive luxury apartment complex in the Chinese capital and launched an investigation into the developer for possible “profiteering”, state media have reported.
Last week, this blog reported on the luxury 1,000 sq m penthouse apartments in the west of the city that were selling for more than Rmb300m ($46.2m) but now the government has decided the company may have misled potential buyers and is also investigating its tax records.
Just as the Chinese government is trying to rein in soaring house prices a real estate developer in Beijing has unveiled what Chinese media report is by far the most expensive apartment ever built in the country.
The luxury penthouse apartment of more than 1,000 sq m is on sale for Rmb300,000 per sq m, or a total price tag of more than Rmb300m ($46.2m), according to an unnamed representative of the developer, quoted in Chinese media.
As JP Rathbone reports in Monday’s FT, it’s not just beach-front properties in Leblon whose prices are heading for the sky. In Brazil’s favelas, where police are finally providing a semblance of security, house prices have doubled or trebled over the past few years.
So, time for a bubble warning? For many reasons, in the mass housing market, the answer is a resounding No. What’s harder to measure is the emergence or not of a wider credit bubble. Here, the warning lights are flickering. A new law to monitor borrowers’ credit histories may help.
If China is on course for a hard landing after 2013, as Nouriel Roubini of New York University is predicting, a key driver could be the country’s vast number of empty apartments. It’s become the symbol of over investment that Beijing is struggling to tame. Earlier this year, Yi Xianrong from the Chinese Academy of Social Sciences put the figure at 64.5m − enough to house a third of China’s urban population.
Rising wages threaten to burst China’s investment bubble, writes Peter Tasker, a veteran Asia market watcher, in Tuesday’s FT.
Tasker, who saw the Japanese boom-bust unfold 20 years ago, sees history repeating itself today in China. He says the China story “is simply another version of the “new era” thinking that has characterised every investment mania from the South Sea bubble to the dotcom frenzy”.
The World Bank has given its most explicit warning so far about the dangers of assets bubbles in emerging markets.
In a report entitled Robust Recovery, Rising Risks, on East Asia and the Pacific, the bank on Tuesday urged policymakers to remember the lessons of the 1997-8 crisis and take “adequate precautions to ensure that they do not repeat the same mistake twice in slightly over a decade”.
The bank’s warning had little immediate impact on Asian markets, where the US dollar was steady and equities were mostly slightly up. But following cautious comments earlier this week from Morgan Stanley, until recently a big bull of emerging markets, investors seem to be growing a little more wary.
Chinese shares saw the most negative session in two weeks after data showed Chinese growth moderating. Beijing’s attempts to cool the red-hot property market appear to be gaining traction – helping ease growth for the quarter to 10.3per cent y/o/y, from 11.9 per cent last quarter. The economy grew 11.1 per cent overall in the first half.
The Shanghai market fell 1.9 per cent to 2,424.304, while the Shenzhen composite lost 2.1 per cent to 963.823. Resource stocks saw selling, with Jiangxi Copper falling more than 1 per cent, and PetroChina losing 1.2 per cent.
On the face of it, there was more bad news about China’s slowing economy today. This time it was the decision by Goldman Sachs to reduce its forecast for 2010 growth from 11.4 per cent to 10.1 per cent. The Shanghai market reacted by falling more than 2 per cent – before ending the day slightly higher on more positive noises from the government.
The Goldman research report followed the release of the June PMIs for China yesterday, which also showed that the pace of expansion of the economy was slowing.
It is the sort of news that investors have been waiting for with some trepidation since the government launched a crackdown on property speculation in mid-April. And it feeds into the growing view that the global recovery could be losing steam.
Another whopping growth figure from Brazil adds to the evidence of overheating: first quarter GDP grew by 2.7 per cent over the previous quarter and by 9 per cent year on year.
Investment also surged but is still far short of what is needed to make this kind of growth sustainable. Consumer price inflation ballooned from 4.17 per cent in October to 5.26 per cent in the 12 months to April. The government’s target is 4.5 per cent.
Yet more evidence that Brazil’s economy is growing too quickly for comfort: figures for industrial production in April published today showed a year on year increase of 17.4 per cent, more even than the whopping 16.1 per cent consensus among market economists. The quarter on quarter, seasonally adjusted annualised rate of growth was even bigger, at 19.1 per cent.