Mornin all, broken into profit today for first time in ages. But, at risk of tempering the enthusiasm, my brother who works at Morgan Stanley in Hong Kong sent me this this morning...
"Just be careful with China. Shanghai's massive property bubble has
already burst and the effects have yet to be felt. There's huge over
investment in many aspects of production as well, which means that spare
capacity will prevent people from getting the return on their investment
that they will eventually need to show. I just mean to say that
diversifying away from china with no over-reliance on it is a good idea.
Things like LDC will become completely illiquid in a crisis, meaning
you'll never be able to see their stock."
Plus this from a memo that went round MS recently:
"China's foreign exchange reserves rose by less than trade surplus in
November, the first time since March 2001. The foreign exchange
reserves rose to $794.2 bn in November from $784.9 billion in October
compared to trade surplus of $10.5 bn in November. It seems that money
is beginning to leave China. It is a trickle, not a torrent yet like in
1998. Nevertheless, the reversal in money flow can keep China's
financial condition depressed relative what it was before, which puts
more pressure on a fragile property bubble.
If the money outflow continues, expect China to do something to revive
the currency appreciation expectation. Moving the exchange rate up
quicker might be one option."
Does anyone know what the inflation position is in China at the moment?
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