CBS 60 minutes this Sunday (you can already google it and see the preview) rather untimely will have a special feature on housing bubble in the residential sector in china. I guess when the cyber attacks subsides, people have to find something not likable about china. Vanke's chairman shi would be on it acknowledging the danger of the potential bubble. He seems to be quite pensive about it. A lady done very well with commercial real estate considered residential development in china coming to an "end" already. Really?
Sounds extreme, but hype is hype and people buy that #$%$. Following the 60 mins' lead, you can imagine major networks and news outlets in the west will have a field day and will continue the same theme for the entire week or two.
On top of that, chinese govt is currently trying to implement--seriously, they say, for once--5 regulations aiming to clamp down on price speculation on apt and land. Several banks have already started raising mortgage rates. Property tax increase has also been put into the resale system.
All in all, next week for xin will be a toughie. I am not sure if xin management can come out to clarify things to appease the concerns which will be real in the coming week. It is anyone's guess at this point how xin will be affected and if xin will be affected. given the sudden and aggressive pps rise this week, the vulnerability is there for weaker hands to bail first thing Monday morning. longer term, i still believe xin management can thrive in the chaos. I like their conservative understated approach. Perhaps they can turn crisis into opportunities, as they say.
Don't lose sleep over the weekend now :) What am i saying,,,since most of you have traded out already!
Most of our national news media is from the political left, and do not like the comparison of China's growth (7.5%) to our growth (1.75%) even with enormous Fed. government borrowing. Therefore, the news media is predisposed to find fault with China and any other country that is doing better than we are. Where was 60 Minutes in 2006 when we were "giving away" mortgages to anyone who walked in the door of a mortgage broker? I think the 60 Minutes audience would be better served by doing a program about our $16 trillion debt, and 4 consecutive $1 trillion annual budget deficits.
in fact, not long ago 60 mins did one on the mortgage fiasco, after the fact, about 6 yrs too late, pointing finger to greenspan. back then, apparently, no one understand even what the derivatives really are and everyone jumped on the ship because there is money to be made.
at least with china, i don't see people being kicked up due to foreclosure. rich becomes richer, poor remain to be poor, as usual, as always...
The real issue is the extreme levels of non- government backed lending that is going on. Shadow banking. Ring any bells. Some claim that it accounts for 44% of the lending going on in China. The issue is not with XIN, the issue is with the Leveraging that is going on outside of the control of XIN. To say leveraging isn't going on in China is a misunderstanding of China. The government has much less power than it may claim. It Banking sector is failing. The shadow banking, some claim is causing an extreme level of inflation and bad loans that were used to fund projects like the ones XIN is taking on. The following article claims that Shadow banking has gone up 600% since 2012. If that doesn't ring any bell I don't know what does.
To find the article google "China's Brokerages turn Shadow banks"
I don't think 60 mins will forget to miss this elephant.
i think it is just another financial instrument, not unlike what they do on wall street. it is simply risk management play. i don't think xin needs to turn to shadow banking, aka, brokers to borrow money because xin has good financial standing, while lesser developers may indeed turn to high risk loans and get into trouble soon, since there is anticipated slow down in buying once buyers have to pay more. what does all these mean to xin? I don't know.
Let me explain which the current price levels in China are.
Basically Real State is based on the initial sqm land price incidence per footage that could be obtained.
By the recent prices on auctions, Chinese developers have begun to compute around USD 300 per sqm and that value is exactly the same incidence of my beloved and suffering country (Argentina).
Consider the difficulties and let me go wrong a bit from here on out:
Chinese government can´t stop the growth without the risk of social unrest. They only increases stamp taxes and additional land taxes to collect their percentage or commission before the presale. THEY ARE PARTNERS AT ALL.
The Chinese governments are increasing the base prices and not the developers!
So the Chinese government telling us they are tightening Real State policy to avoid the price increases…
Let me repeat our basic labor + materials costs in Argentina. Chinese labor is cheaper and building materials (iron, cement, aluminum are international commodities) are the same , so can assure you –using a 3000 sqm matrix like the XIN developments- their cost should be around U.S. $ 1100 per sqm.
This amount should be added to the impact of the land and that depends on where is development. Certainly Beijing is much more expensive than Chengdu, like our capital Buenos Aires is the most expensive land here.
China and Argentina are also equivalent in the form of payment with few different shades, as follows:
In Argentina we HAVE NO CREDIT and we pay in CASH using dollars. Because our populism isn´t allowing enough dollars, our developers suspended the tasks to wait and see when ´ll come the dollars again. We don´t accept our pesos because the spread between the official market and black market exceeds 50 %.( Monthly inflation nearly 2%)
China does not have an inflation rate of 25% therefore “wethechinesepeople” paying in advance 20% during Presales.
Chinese developers recover 100% of the land MONEY on presales so their profit margins are sooo nice.
So on and beyond CBS with a price cut hypothesis by a blitz media next week, China will continue growing above 7% without problems and would not miss if China closes the current2013 nearly 9% as usual in the last decade.
Here you know I have long XIN pos and you never seen from me a single one strong buy because, simply, believing everyone should bet according their ability and each person knows how long can wait and everyone must decide or needs short, medium or long term.
It is not my case because only betting on XIN available assets. Of course I would like to see this stock at $ 1000 but it´s not mine. As fundamentalist disbelieve the toilet papers that are emitting the largest central banks so better to keep the money on assets very quiet knowing our populism has issued 40% of pesos in the last two months of 2012 ....
We know very well what it means: stagflation and in that way is the present policy of your FED: stagflation is the American future.
Please JB: be careful not to post strong buy or strong sell depending on whether or not you how many ADS in your pockets, please again look yourself in the mirror keeping a reasonable balance during your XIN times.
i am not so sure, whether it will be older news mixed with newer news. we do know that china's real estate sector is so called recovering so that means it must recover from some less favorable conditions. question for me is that whether the recovery is not in sight (sounds like that from the lady in 60 min), or too slow and complicated thus ineffective and useless (poor people still have no hope to get those apts despite recovery) or faster than the experts on 60 mins realize. I don't know...
What is the point of govn regulations in china? Its to prevent that price rises. Its not to decrease home prices. As such, fine that the govn prevents a bubble.
On the other hand, who are today's buyers of xin? I belief professional investors. And they don't scare away due to sensation journalism. If private traders would have been the buyers, we would already have some pullbacks due to profit taking.
to be honest, there are quite a few factors at play that i honestly am a bit confused on what is what, what affects what, what does not affect what...there is no doubt this week funds are buying from traders. let's see how those guys react to the 60 min expose, what their comfort level will be. bottom line, the market is always right. always can find good explanations retrospectively. unless xin management steps out to clarify things and educate their investors on china the enigma, like they did very well in the cc mostly by the cfo, i expect a turbulent week ahead, as much as i don't want to!
on some level i sense that usa is quite jealous that china is making progress, so every other week something bad about china has to surface. yet, if china goes down, usa will be the first one affected, taking xin investors with it, hahaha.
I've learned throughout the years that usually the unexpected happens in this crazy casino we call "Wallstreet." You may be right but it could bring many people's attention to the sector and you may just be surprised and see a huge wave of buyers. Of course just looking at the other side of the coin here.