A Cooler Springtime for China
Emerging Markets
SUDDENLY, CHINA IS REACCELERATING. After the People's Republic introduced a raft of measures to cool down the economy over the last 12 months, including raising interest rates for the first time in nine years, there's evidence now that growth has sprung higher.
China recently reported that industrial output jumped 16.9% over the January to February period versus last year, "especially shocking in light of an 8.9% daily average comparison released for January," observed Morgan Stanley chief economist Stephen Roach in a note to investors last week. (The two-month report strips out distortions caused by the traditional Lunar New Year falling in February this year and in January in 2004.)
That's worrisome on a number of fronts. It suggests China will redouble its efforts to chill the economy, using a combination of rates and other policies. But higher rates will likely invite more capital inflows, Roach points out, raising speculation that China will revalue its pegged currency higher.
That view was fed by news that China's trade surplus totaled $11 billion in January and February, versus an $8 billion deficit a year earlier. Thus, Goldman Sachs China strategist Thomas Deng reaffirmed Goldman's long-held, and so far utterly mistaken, view of a 5% upward revaluation to the renminbi. A revaluation would be "largely positive" for Chinese equities, Deng observed, by increasing book values and boosting profits for selected companies. Most likely to win, in Deng's opinion, are Sinopec Zhenhai Refining & Chemical, Lenovo, China Petroleum & Chemical, China Eastern Airlines, and China Southern Airlines.
Wilfred Sit, who runs Greater China Fund, a New York-listed closed-end fund, said in a recent interview that he expects economic growth to continue "at a high level. We had a midcycle correction, and the macro themes are still intact." Yet Sit is skeptical that China will revalue higher, noting that to do so would invite even more capital flows from speculators. Meanwhile, Lombard Associates noted that soaring exports have mitigated China's slowdown. Beijing, Lombard's Charles Dumas wrote, "will fight tooth and nail to hold its export advantage." People betting on a currency revaluation ought to worry.
So much depends on whether the reacceleration is real. We checked in with the Economic Cycle Research Institute, which created the world's first leading index and, as it happens, unveiled the first leading index for China industrial production last week. At some 40% of Chinese GDP, industrial production is the main driver of economic growth, says Lakshman Achuthan, ECRI's managing director. Achuthan & Co. created the leading index largely by ignoring Chinese statistics -- known for their poor quality, coverage, frequency and timeliness -- and concentrating instead on more reliable statistics for China's big trading partners and neighbors. They pulled these into an index (based on how significant the trading partner was to the Middle Kingdom), and backtested the result to see how well it forecasted turns in Chinese industrial production.
Achuthan won't say what the index components are, but allows that they include "specific regional-shipping rates, leading indicators of industrial sectors for trading partners, some commodity price information, and some purchasing manager information." And in backtesting, the ECRI index anticipated cyclical turns in industrial growth by eight months 100% of the time since 1996.
What's it showing now? The recent industrial production data were distorted by an increase in textile production, which surged as quotas on Chinese textiles vanished, says Achuthan. In that sense, the reason was "artificial.
In fact, growth in industrial production has moderated since last spring "from a spectacular to a merely strong pace," he continues. "It merely means we are going from a rapid to gentle boil. And it's too early to suggest that Chinese industrial production is ramping back up. The leading indicator is still easing. The more likely scenario we're going to see is that industrial production is flat in its growth rate." To get the data, you need to subscribe to ECRI's monthly International Cyclical Outlook -- which costs $10,000 a year.
LATELY, PREMIER WEN JIABAO FRETS about the steep increase in fixed-asset investment, and in particular, many believe, about a perceived speculative bubble in the Shanghai real-estate market -- much of it caused by foreigners betting the renminbi will rise.
China tightened again in recent days to chill the real-estate market, allowing banks to raise mortgage rates, cutting loan-to-value ratio requirements (thus, requiring bigger down payments) and assessing a capital-gains tax. Prices in Shanghai spurted by nearly 70% between 2001 and 2004, versus an overall gain of 25% for China, according to UBS Securities. Average residential prices in Shanghai are now higher than in any other urban region in the People's Republic, and there's plenty of evidence that Hong Kong and Taiwanese investors have plunked down cash for new luxury apartments. UBS' Jonathan Anderson claims that more than three quarters of new luxury apartments are purchased by non-Shanghai residents. Shanghai accounted for nearly a fifth of China's mortgage lending in '03 and '04, even though it accounted for just 5% of total property construction.
As China moved to slow fixed-asset investment, property stock prices fell, with the hardest hit including China Vanke, Shenzhen's biggest developer, Shanghai Shimao, and New World China. Shanghai Forte, which sold stock just days before, also fell. Sellers marked down physical property prices in Shanghai, but just as quickly marked them up, reports the knowledgeable Shu Yin Lee, who runs Grand River Properties, an investment partnership that owns Shanghai real estate, and also Dalton Greater China, a new long-short fund that invests in Chinese stocks ("Twin Peaks," June 23, 2003).
Yet while Shanghai residences are twice as expensive as they are elsewhere in China, incomes are twice as high too. And construction activity already has slowed sharply. Whether a bubble exists is a matter of debate, at least to Lee, who admittedly has an axe to grind. "I actually don't think there's a bubble," Lee says. "There are still more buyers and more users for the best properties downtown than they're supplying. Reports of speculators buying apartments and abandoning them are overstated. The vacancy numbers have been coming down every year for the last five years. And anecdotally, the buyers I meet are not buying to flip empty apartments. As a landlord, I know first hand that there are a lot more tenants for our apartments than we have apartments."
China's move to lower loan-to-value ratios to 70% was entirely expected and most people found it mild. Some had expected it to fall to 50%. Already, Lee reports, "it's very difficult to get an 80% loan-to-value ratio for high end real estate. And it's difficult to get even 60% or 70% for the older properties, which are the most expensive properties in Shanghai." After the initial knee-jerk reaction of lower offering prices, "all the evidence I can get in terms of new projects coming on line are meeting developers expectations in terms of demand. And prices are as firm as most of the developers' optimistic expectations." Buyers, in other words, aren't adopting a wait-and-see attitude.
That said, Lee has focused on buying commercial real estate for the past six months, where yields are superior, on the theory that demand for Shanghai office space by Fortune 500 clients will continue.
Lee says buying Chinese real estate on the stock market is a lot cheaper than buying physical real estate, which is a key reason he launched Dalton Greater China Fund, which just now has nearly a third of assets tied up in direct and indirectly property related equities. Here he's a fan of Hong Kong-listed Henderson China Holdings. "It has a great portfolio of assets in China of which Shanghai makes up the biggest portion, it trades at 50% discount to NAV, and about 30% of book. And management is experienced, well-respected, and conservative." Henderson China, Lee continues, is "a safer way to play the property market than through one of the local developers."
中国经济增长实已放缓
骤然间，中国经济再度提速。过去的12个月里，中国采取了一连串的措施来给经济降温，包括进行9年来首次加息。但是，眼下有迹象表明，其经济增长速度再次冲高。
中国最近公布，今年前两个月工业增加值较上年同期增长16.9%。“尤其令人吃惊的是，1月份工业增加值日均增长8.9%，”摩根士丹利(Morgan Stanley)首席经济学家史蒂芬?罗奇(Stephen Roach)在上周的投资报告中称。（两个月报告剔除了中国传统农历新年──春节假期的影响，今年的春节在2月，2004年的春节在1月）
这从很多方面看来都是令人担忧的。它表明中国将加倍努力给经济降温，同时动用利率和其他多项政策。但是，罗奇指出，利率的提高可能会促进境外资金流入，引发人们对中国提高人民币估值的猜测。
中国最新的贸易数据越发增强了这一观点。今年1至2月中国的贸易盈余达到110亿美元，而去年同期为贸易赤字80亿美元。因此，高盛（中国）公司(Goldman Sachs China)的策略师Thomas Deng重申了公司的一贯看法，预计人民币应该升值5%。他说，币值重估对中国股市“基本上是有利的”，因为它能提高上市公司的帐面价值，并提升部分企业的利润。他认为最有可能受益的公司是镇海炼油化工(Sinopec Zhenhai Refining & Chemical)、联想集团(Lenovo)、中国石化(China Petroleum & Chemical)、东方航空(China Eastern Airlines)和南方航空(China Southern Airlines)。
管理在纽约上市的封闭式基金Greater China Fund的希特(Wilfred Sit)最近接受采访时表示，他预计中国经济增长率将继续保持在一个较高水平，虽然其间进行了调整，但宏观面依然完好无损。但是，希特对中国能否提高人民币估值表示怀疑，因为这样做会吸引更多投机者的资金涌入。同时，Lombard Associates认为，出口的迅猛增长削弱了经济减缓的影响。该公司的杜马斯(Charles Dumas)写道，“中国将竭力保住它的出口优势。”那些欲从人民币重估中获益的人们一定会担心了。
因此，这在很大程度上要取决于中国经济是否真在加速。我们就此向经济周期研究学会(Economic Cycle Research Institute，简称ECRI)进行了核实。该学会创建了全球第一只领先指数，并于上周发布了有关中国工业增加值的首只领先指数。ECRI的董事总经理阿楚坦(Lakshman Achuthan)称，中国的工业增加值占国内生产总值的40%左右，是其经济增长的主要推动力。Achuthan & Co.创立的领先指标对中国政府的统计数据置之不理，而是采用了中国较大贸易伙伴国和邻国的更可靠数据。他们将其编制成指数（以贸易伙伴对中国的重要程度为基础），以此来检验它对中国工业增加产值变动的预测是否精确。
阿楚坦不愿说明该指数的构成成分，但承认其中包括某些区域运输费率、贸易伙伴国工业行业的领先指标、一些商品价格信息和部分采购经理人数据。通过这种方法，ECRI指数测算出，自从1996年以来，中国工业增长的周期平均为8个月。
该指数现在反映出什么呢？阿楚坦称，最近的工业增加值数据因为中国纺织品配额取消所带来的纺织品产值的增长而扭曲了。从这个角度来讲，人民币升值的理由不成立。
他说，实际上，中国工业增加值的增长自从去年春季以来已经有所减弱，从一个可观的高点降至一个比较强劲的水平。要下断言称中国的工业增加值重新攀升还为时过早。领先指标仍在下滑。更可能出现的情况是增长率持平。
最近，中国总理温家宝表达了对固定资产投资激增、尤其是上海房地产市场蕴含的投机泡沫（主要因为预计人民币汇率上升的外国人大量购置地产）的担忧。
近日来，中国再度采取措施给房地产市场降温，允许银行提高按揭利率，提高首付款比例，并且正在考虑征收资本所得税。UBS Securities的数据显示，上海的房地产价格在2001至2004年间飙升了近70%，而中国房地产价格的总体涨幅为25%。目前，上海的住宅平均价格超过中国其他任何一个城市，许多证据表明，香港和台湾的投资者正大量购买新建高档住宅。UBS的安德逊(Jonathan Anderson)称，新建高档住宅的四分之三以上都是由上海以外的居民购买的。在2003至2004年，上海的房贷总额占到全国的近五分之一，尽管房地产的建设规模只占全国的5%。
随著中国固定资产投资减缓，房地产类股下挫，遭受打击最重的包括深圳最大的房地产开发商万科企业(China Vanke)、上海世茂(Shanghai Shimao)和新世界中国(New World China)。几天前刚刚上市的上海复地(Shanghai Forte)也告下挫。Grand River Properties的负责人Shu Yin Lee报告称，地产商一度调低了上海地产的价格，但又以同样的速度将其调高。这家投资合伙企业持有上海的房地产，并推出了投资于中国股票的基金Dalton Greater China。
但是，虽然上海的住宅价格是中国其他城市的两倍，当地居民的收入也是其他地方的两倍。而且，上海的建筑业活动已经大幅减缓。究竟是否存在房地产泡沫还有待商讨。Lee认为，泡沫并不存在。对于正在供应的市中心最好的房地产项目，仍有很多买家和用户。有关投机者购买住宅然后空置的报道有些言过其实。过去5年中，空置的房产数量正在逐年减少。
中国将房贷占房产总价的比例降至70%的做法早在人们意料之中，多数人认为这一幅度很温和。一些人曾预计，这一比例将降至50%。Lee称，对于高档房产来说，很难从银行获得房产总价80%的贷款。而对于二手房产来说，要拿到70%甚至60%的贷款都很困难。Lee说，在最初的售价下滑之后，“我能得到的所有证据都表明新建项目的需求符合地产商的预期，而且价格也达到了多数地产商的乐观预期。”换言之，购房者并没有采取观望态度。
据说，在过去6个月里Lee已经侧重于购买收益更高的商用地产。理论上讲，《财富》500强企业对上海写字楼的需求将会上升。
Lee称，和购买实际的房产相比，购买中国房地产类股的成本要低得多。这也是他推出Dalton Greater China Fund的一个主要原因。目前该基金近三分之一的资产是直接和间接的房地产相关股票。他比较青睐香港上市的恒基中国(Henderson China Holdings)。他说，该公司在大陆拥有大量地产，其中上海的比重最大。该股的股价是每股资产净值的50%和帐面价值的30%左右。此外，公司管理层经验丰富而且作风稳健。因此，投资其股票是从房地产市场获益的一个更安全途径。
