Wednesday, October 16, 2013

Less Bang Per Yuan (excerpt)

China’s latest trade data for September showed a slight decline in exports and a slight increase in imports on a seasonally adjusted basis. Both have been in relatively flat trends for the past year.

Another troubling development is that China’s total social financing rose rapidly again during August and September after a brief slowdown during the previous three months. Why is this troubling? It seems that China is getting less bang per yuan of debt, as the current pace of borrowing is about the same as since 2009 yet real GDP growth has clearly slowed over this period. One more troubling development is that the CPI inflation rate may be picking up, led by food prices.

The good news out of China for stock investors is that the China MSCI stock index is up 22.4% since the year’s low on June 25, with forward earnings rising to a new high in early October. Forward revenues also have risen to new highs, and the forward profit margin has been recovering over the past year.

Today's Morning Briefing: Waiting for Godot. (1) Depressing dysfunction. (2) Private study finds that fiscal uncertainty boosted unemployment rate by 0.6 ppt. (3) Fed study estimates that jobless rate would be at 6.5% but for fiscal and monetary policy uncertainty. (4) Fed president says $600 billion of QE lowered jobless rate by just 0.25 ppt! (5) The government is here to help. (6) Beckett’s absurd drama is our script. (7) US is under review. (8) Industrial commodity prices drifting lower. (9) China getting less bang per yuan of borrowing. (10) Earnings and margins rising in China. (11) Europe has hit bottom, and struggling to recover. (12) Output remains flat in most EMs. (13) Focusing on overweight-rated fun-related stocks. (More for subscribers.)

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