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Wednesday, February 08, 2012 2:54 AM

Spotlight China: Electricity Consumption Drops Sharply; Central Bank Vows Housing Support; Oil Imports From Iran Fall Again; Asia Real-Estate Bull Turns Bearish

Mish Moved to MishTalk.Com Click to Visit.

Inquiring minds are tired of the spotlight on Greece (believe me I am as sick as anyone of Groundhog Day).

Given the world will not end when Greece defaults, whether in March of this year or next, let's turn our attention to a country far more significant.

Chinese Electricity Consumption Fell Massively In January

Business Insider reports Chinese Electricity Consumption Fell Massively In January, And The Chinese New Year Doesn't Explain It

Ultra-brief note here from Nomura's Zhiwei Zhang :

According to the China Securities Journal, China's electricity consumption in January fell by 7.5%. We estimate this may be the first decline since 2002 (excluding the financial crisis period in 2008-09), indicating industrial production may have slowed sharply in January.

They don't have any more answers here at the moment, except they say that if you're thinking it has something to do with the New Year, then you are incorrect.

For now it's just one of those things that make you go hmm...
China Pressures Iran On Oil Prices

China has stepped up the pressure on Iran in the face of Europe's oil embargo. Business World reports China's Oil Imports From Iran Reduced Again
China will reduce its crude oil imports from Iran for a third month, sources said today, as the two remain divided over payment and price terms, although they plan to meet again for talks as early as this week.

China is the top buyer of Iranian oil and also the fastest expanding major oil importer, putting it in a strong position to negotiate for better terms after it more than halved imports for both January and February.

The reductions for March-loading supplies will be largely the same, if not deeper, than the previous two months, industry officials with direct knowledge of the supply situation told Reuters.

China, which buys around 20 percent of Iran's total crude exports, cut its January and February purchases by about 285,000 bpd, just over one half of the total average daily amount it imported in 2011.
China Central Bank Vows Housing Support

In a sure sign that property prices in China are crashing faster than the Chinese government wants, China Central Bank Vows Housing Support
China’s central bank pledged support for first-home buyers as a crackdown on real-estate speculation threatens to trigger a property slump in the world’s second- biggest economy.

Officials will increase support for construction of affordable housing and ensure that “loan demand from first-home families” is met, the People’s Bank of China said on its website yesterday evening.

Policy makers aim to limit public discontent by making housing more affordable, with Vice Premier Li Keqiang, a possible contender to be the next premier, describing the distribution of low-cost homes as a key test of government credibility. At the same time, the ruling Communist Party aims to avoid the economic “hard landing” that Fitch Ratings said yesterday is a key global risk.

“The government doesn’t want to see home transactions slide too fast -- that may hurt economic growth,” said Lu Ting, a Hong Kong-based economist at Bank of America Corp.
Too Late to Prevent a Hard Landing

Given the massive size of China's property bubble, it's far too late to prevent a crash landing. The only way to prevent crashes is to not let bubbles get so big in the first place.

Asia Real-Estate Bull Turns Bearish

MarketWatch reports Asia Real-Estate Bull Turns Bearish
Asia’s gradually cooling property markets aren’t the great buys they once were, according to one expert in the region, who says better bargains can be found in the depressed markets in the West.

Tim Murphy, the Hong Kong-based chief executive officer of property advisory group IP Global, says he’s telling his clients to look more towards New York and San Francisco for deals, although London also ranks well in terms of rental yield in some projects.

Back home in Asia, the only market he likes is Malaysia, where average prices in its big cities are about one-tenth of those in Hong Kong, while its commodity-backed economy should outperform its export-dependent regional rivals.

What’s changed? Murphy says the ongoing debate in Asia during the current soft patch is being driven by inflation concerns that were absent during previous periods of economic weakness.

Specifically, he sees a “role reversal” from the regional crisis that unfolded in 1997, as fresh barriers to foreign investment and speculative activity are now enacted across many parts of Asia, while hard-hit cities in the West are offering tax breaks and other concessions as incentives to invest.

Today, governments around the region, and particularly in China, are wary that too much liquidity could stoke a U.S.-style housing bubble and inflict long-term damage upon the economy, he said.

“Singapore and Hong Kong are two of the freest economies in the world, yet you pay more in stamp duties [real-estate transaction taxes] now than you would in London, because they are very worried about the markets continuing to overheat,” Murphy said.
Infomercial for Property-Advisory Firm IP Global

As much as I agree with the headline message, I have to comment the same message could have and should have been said years ago. Given the illiquid nature of real estate, one cannot sell on a dime when the market turns.

"We see what’s happening as a great chance for Asians to buy overseas at the moment,” Murphy said, adding that in December he opened an office in Shanghai to tap the growing interest among China’s newly wealthy for overseas homes. 

Given the entire two-page article was about Murphy and his firm, I have to ask "Was that an news story by MarketWatch or an infomercial for Tim Murphy?"

Regardless, anyone who bought in China in the last couple years and has not sold yet is now likely trapped.

Mike "Mish" Shedlock
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