End of the China Bull? Part 2.

[frugal.rock]

So, some first hand news from the Missus in Beijing.
Shop's and restaurants are closed in general.
Some supermarkets are open and playing a new government issued song about wearing a mask.
It's become a little popular apparently.
Masks are to be worn outside at all times.
There's 4 to 6 inches of snow.
Road travel into Beijing is restricted.
The roads are empty.
As far as I see it, the bull market is over, at least for a while until the virus gets contained.
The country is basically shut down.
And probably will be for another fortnight or so at least?
Meanwhile, for all the business owners who can't do business, it's going to be a case of survival of the fittest or wealthiest.
F.Rock

 

[Trav.]

https://smallcaps.com.au/china-hit-hard-by-growing-coronavirus-crisis/

Article from the 4th Feb highlighting some of the impacts.

There's 4 to 6 inches of snow.

This caught my eye for some reason so I googled the effects on temperature and the virus which lead me to this site which referenced a study about virus survival and temperature which I found interesting as I initially thought the opposite ( doh!! I am only a sparky and not a microbiologist ) and the cold temperatures will not be helping in the northern hemisphere

https://www.accuweather.com/en/weather-news/what-you-need-to-know-about-the-wuhan-coronavirus/669458

 

[qldfrog]

Yes Cold preserves: slower longer

Was wondering about that and the effect in the ski stations with the contamination happening in the French Alps.

 

[rederob]

Just to put this into perspective I suggest you read this.
The coronavirus is a new strain and getting a lot of attention as a result. Like all similar viruses the most at risk are elderly, any typically suffer underlying medical conditions or had poor immune systems at time of contraction.
I make a point of getting a flu shot every year and while it might not give immunity to all the viruses out there it does seem to help my body defeat other strains when I am in good health.
Back on topic about the China bull, it will be interesting to see data over coming months to see what impact the virus has had on production as distinct from consumption.
My suspicion is that this new virus will melt into the fabric of global diseases and in the meantime we will try to develop a vaccine as we do with other viral diseases.
Personally, I am more worried about idiots on the road than those to ignorant to cover up when coughing.

 

[frugal.rock]

Back on topic about the China bull, it will be interesting to see data over coming months to see what impact the virus has had on production as distinct from consumption.

Maybe I missed it reported here, but the public holidays in Beijing at least, have been extended indefinitely.
Train's are empty.
Don't know if factories in regional areas are open?
I imagine they are mostly closed due to the timing?
All the people are stuck where they went! for the Spring Festival public holidays, usually their home town.
If anything current is going to fuel a market correction, this is it.
Certain stocks will be hit hard...or harder than they already have been.
Things to consider.
F.Rock

 

[lusk]

If anything current is going to fuel a market correction, this is it.
Certain stocks will be hit hard...or harder than they already have been.
F.Rock

When mortality rate is 100%, and the dead start walking maybe.
If its not happening in the US its not worth worrying about.

 

[qldfrog]

When mortality rate is 100%, and the dead start walking maybe.
If its not happening in the US its not worth worrying about.

I am afraid it seems @lusk is describing the general attitude here. not withstanding the fact China is much more important economically for us than the US and the latest Democrat nominee brainfart.
Lessons need to be learnt

 

[Dona Ferentes]

one newsletter writer is laden with worry, in fact going so far as to say: "For China, and the world, this is one BIG Black Swan and its name may be Minsky."

I continue to be amazed at the timidity of the downgrades to Chinese economic growth, by the world’s leading financial institutions. Flabbergasted and dumbfounded would better describe my reaction.
In this regard I was therefore relieved to watch both of the interviews below. Notable, as always, that ‘independent’ economists have a lot more courage to stray from the Wall Street pack.

https://www.cnbc.com/video/2020/02/...d-see-technical-recession-economist-says.html

https://www.cnbc.com/video/2020/02/...-on-chinese-gdp-a-shocker-economist-says.html

I continue to predict that we will see a significant contraction in Chinese economic growth in the first quarter of 2020, versus Q4 2019.

I ... reaffirm my view that the coronavirus will have a much, much bigger economic impact than the SARS crisis in 2003. In fact my degree of conviction has grown significantly since last week.

During the past week we have seen many major global companies highlighting the impact that the coronavirus is having on them.
Hyundai has been forced to close all its factories in South Korea due to a shortage of components from China. Kia and Ssangyong are also closing plants.
According to Germany’s Centre for Automotive Research, a quarter of Germany’s auto sales come from China. During the week many German companies said that if the crisis isn’t resolved in the next week or so they will have to shut down production, due to a shortage of components from China....

Today, China alone accounts for a third of the growth in the global economy. They are the beating heart of global supply chains.
They consume about 50% of the world’s zinc, aluminium, lead, tin, nickel and copper.
And between 50 to 60% of the world’s iron ore, steel, manganese ore and metallurgical coal.
Never before have we seen a country the size of China lock down such vast numbers of people. I have seen estimates that approximately 400 million are now in some form of quarantine.

I don’t need to tell you that the next few weeks will be absolutely critical.
How many companies will reopen next week?
How many companies around the world will run out of components made in China?
When will the earnings downgrades begin?.....

The Pain Report

 

[frugal.rock]

Beijing Banks are set to open again on Monday.
Will try to get more info out of the missus... finance matters aren't the priority when we get a chance to speak.
I suspect most businesses will reopen on Monday...

F.Rock

 

[Dona Ferentes]

Everyone will be scrambling for cash. This is a real challenge for a centrally planned economy. Some of those aspirational targets may need to be rejigged.
https://amp-scmp-com.cdn.ampproject.org/v/s/amp.scmp.com/business/banking-finance/article/3051756/cash-crunch-chinese-start-ups-scramble-cash-venture?amp_js_v=a3&amp_gsa=1&usqp=mq331AQFKAGwASA=#referrer=https://www.google.com&amp_tf=From %1$s&ampshare=https://www.scmp.com/business/banking-finance/article/3051756/cash-crunch-chinese-start-ups-scramble-cash-venture

China had 63 million self-employed businesses at the end of 2018, which collectively provided 150 million jobs, according to the latest economic census by China’s National Bureau of Statistics

 

[fergee]

Just a thought I have had for while now is what happens when Chinese nationals who own investment properties in NZ, Aus and Canada start to have financial troubles back home? If they start to get margin calls or start to run out of working capital due to a big slow down will they start to liquidate overseas investments to cover shortfalls back home? I have had this thesis for a while now but this Covid-19 could be the trigger, it may spill over and effect our property markets through an increase in selling pressure...Just a thought I would be interested to hear what other people think about this.

 

[qldfrog]

SZ will reopen monday as well, not sure public transport etc,
to be honest, not much more could have been done
asx will probably jump 5pc at the news of capitulation

 

[frugal.rock]

Just a thought I have had for while now is what happens when Chinese nationals who own investment properties in NZ, Aus and Canada start to have financial troubles back home? If they start to get margin calls or start to run out of working capital due to a big slow down will they start to liquidate overseas investments to cover shortfalls back home? I have had this thesis for a while now but this Covid-19 could be the trigger, it may spill over and effect our property markets through an increase in selling pressure...Just a thought I would be interested to hear what other people think about this.

A logical reasoning, however, I would put it out there that the majority of property owned in Aus by Chinese Nat's will stay that way.
It's the wealthiest of them that own property here, and I daresay the majority are Permanent Residents, or have family that are. If not, the properties are rented out and providing a solid income for them.

A few years ago (5?), the Chinese guv put restrictions on moving large money out of the country.
Things like maximum yearly withdrawals from saving or bank accounts of ¥100,000
when inside foreign countries.
I remember there was issues inside the CCP because high rankers were syphoning funds out to Aus, Canada, NZ etc to buy property and businesses, almost defection in a way... most/ some? of the money was from corruption.
We are unlikely to see much of that money wanting to go back there, however, no doubt some will.
I would cap it at 20% max... and imo, that's being hard, my inclination would be to say 7 to 15%.
The bigger worry is for the government over there.
The country has lost somewhere around 12% ? of GDP... with another 3% to 8% on the card's.
The CCP was throwing money at the economy though, so really won't know figures until the balance out all said and done.
My

F.Rock

 

[Dona Ferentes]

Monday’s data from the National Bureau of Statistics (NBS) showed that while there were sharp falls in output across most industrial sectors in January and February, the production of crude steel actually rose – up by 3.1% year on year.

In contrast, the production of cement fell by almost 30% YoY, computers and mobile phones by 31% YoY and 34% YoY respectively and motor vehicles by 46% YoY. ..

https://www.sharecafe.com.au/2020/03/17/steel-production-shines-amid-grim-set-of-china-data/
hat tip aus_trader

 

[rederob]

During the GFC it was China's stimulus that pulled Australia through.
Will history repeat... albeit it at a lesser level as this time we are a lot more exposed to global implications?
Yesterday China's only reported cases of COVID-19 were from overseas arrivals - no new infections otherwise. Whether or not you want to believe China's data is a bit like whether or not you were one of the many that has doubted China's economic achievements over the past 30 years.
China being the nation it is poured its medical might into producing the medical equipment it needed to fight the virus. The 12 hospitals it built in a matter of weeks have now been emptied (according to reports).
China's industries outside of Hubei province are now largely back up and running although not yet at earlier capacity.
Remember that China itself is gearing back up to support its internal population of 1.4B, so there's a massive amount of resources needed to keep it ticking over at the best of times.
And right now one of China's biggest exports are in relation to the range of medical equipment and supplies necessary in the rest of the world because they simply do not have the means nor capacity to meet demand. The WHO catchcry of "test, test, test" has been based on what China, and then South Korea did to literally put the lid on COVID-19. (If you think that Australia's response has been good, then you have been sadly mislead - tune in to the ABC's Dr Norman Swan to get the best advice.)
The other point about China's resurgence will relate to its cost advantage in manufacturing. As the rest of the world sinks into recession or worse, those everyday items likely to be more affordable will be "made in China."
Closing on the topic of "stimulus," China knows it has most to lose if its nation were to grind to a halt. I reckon it will be pulling out all stops to give itself a soft landing, thereby advantaging Australia over most of the rest of the western world.

 

[qldfrog]

During the GFC it was China's stimulus that pulled Australia through.
Will history repeat... albeit it at a lesser level as this time we are a lot more exposed to global implications?
Yesterday China's only reported cases of COVID-19 were from overseas arrivals - no new infections otherwise. Whether or not you want to believe China's data is a bit like whether or not you were one of the many that has doubted China's economic achievements over the past 30 years.
China being the nation it is poured its medical might into producing the medical equipment it needed to fight the virus. The 12 hospitals it built in a matter of weeks have now been emptied (according to reports).
China's industries outside of Hubei province are now largely back up and running although not yet at earlier capacity.
Remember that China itself is gearing back up to support its internal population of 1.4B, so there's a massive amount of resources needed to keep it ticking over at the best of times.
And right now one of China's biggest exports are in relation to the range of medical equipment and supplies necessary in the rest of the world because they simply do not have the means nor capacity to meet demand. The WHO catchcry of "test, test, test" has been based on what China, and then South Korea did to literally put the lid on COVID-19. (If you think that Australia's response has been good, then you have been sadly mislead - tune in to the ABC's Dr Norman Swan to get the best advice.)
The other point about China's resurgence will relate to its cost advantage in manufacturing. As the rest of the world sinks into recession or worse, those everyday items likely to be more affordable will be "made in China."
Closing on the topic of "stimulus," China knows it has most to lose if its nation were to grind to a halt. I reckon it will be pulling out all stops to give itself a soft landing, thereby advantaging Australia over most of the rest of the western world.

I would agree with you..what a world are we living in now except I do not see this applying to steel or coal.
Not much steel in what the west needs now nor in what domestic demand requires in China in my opinion.
Wait and see.Right now, I can get masks from china: they have enough now to sell exports..you know, masks these useless stuff people put on their faces and not only avoid some air contamination but also prevent you from touching your face..Too asian for proud Frenchs, italians and aussies...well we see the results.China will suffer but I believe they will move toward domestic consumption with success

 

[frugal.rock]

So, I have my dear Wife back with me now, exhausted from her trip back to Australia from Beijing last night.
Now she's stuck at home for 2 weeks, isolation.
She brought plenty of masks back with her.
I don't know whether to let my kids go to school or not tomorrow.
They have been off school for a few days after unwanted attention in the playground re their Chinese heritage connection.
The school principal, who has his head screwed on properly, rang me last week regarding some parents concerns and said that my Wife's surname was specifically mentioned.

My youngest daughter has had some friendships broken, for apparently reason's unknown to her. She is 11 years old.
On 2 separate occasions recently, she felt the need to speak to the school counselor about this.
I am unsure if the Principal is aware of these 2 visit's.
On the first day of school, a new teacher, during roll call, asked my eldest daughter if she was Asian.
She has this teacher for maths, and she told me he physically avoided checking her work despite checking others around her, and gave her a wide berth. He doesn't seem to be avoiding her anymore though.
I haven't reported this yet, would prefer to go and look the guy in the eyes. Probably best not doing this though...

It's been a difficult 6 weeks for our family here and in China all for various reasons.
Personally, I'm ready to break down.

Meanwhile, the world is going crazy.
Can't get bread, milk, eggs, flour, custard powder...
If it keeps up, the government has to implement rationing.
The local Cole's has now decided to shut at 8pm, instead of 10pm.
A staff member in the carpark told me that the store was "empty".

IGA was fairly empty also.
I can guarantee, Coles, Woolworths and Metcash, IGA's supplier, are the winners out of this.
I noticed, prices are up.
IGA had mouldy tomatoes.

Meanwhile, clowns want to post threads about when will they close the market's.
Really wish @Joe Blow would just disappear that thread.... Chinese government style...

Free speech is adding to the panic in this situation.
Have you noticed that anyone in the media with a little intelligence, is looking tired and unwell at the moment?
ABC morning show started this week like it was all on, like the Martin Place hostage siege, Lindt Café.
Scaremongering. Breaking news.
Ramping.

A lot of people really need some common sense thought processes.
Society has long gone to the dogs and this overgrown flu has highlighted it.

F.Rock

 

[Smurf1976]

Meanwhile, clowns want to post threads about when will they close the market's.
Really wish @Joe Blow would just disappear that thread.... Chinese government style...

Free speech is adding to the panic in this situation.

I respect that you may quite strongly disagree with my opinion here. Please be assured however that it's nothing personal.

I have nothing against Chinese people or against China per se but things are almost certainly going to become incredibly painful in that regard.

The seven stages of grief - shock, denial, anger, bargaining, depression, testing and acceptance.

Most are still at the shock or denial stage. Either outright denial that there's a problem or denial as to the extent of it both medical and economic. A few will have already gone through all stages but most are at the beginning it seems.

It's inevitable that during all this we will see widespread anger and in that regard there's a serious danger. Aiming to be as politically neutral as possible:

*The virus first became a human pandemic in China (fact).

*The Chinese government has attributed the source to pangolins (debunked) or bats (plausible) in conjunction with poor food practices at markets.

*Alternative theories, which could be considered as conspiracy theories, attribute the cause to a research lab in Wuhan China located within walking distance of the food market where the outbreak seems to have originated (plausible).

Now to be clear, ordinary Chinese people did not intentionally do this but a very major failing has occurred on the part of Chinese authorities. Whether it came from a food market or a lab, in either case it was their job to properly regulate, inspect and enforce to prevent such an occurrence. An occurrence which has harmed most of the world's human population either medically or economically. In due course anger will erupt in abundance - the only question being who it's directed at and in what way.

In regard to that failing, China's culture of secrecy and a lack of freedom of speech has plausibly contributed. The doctors who raised alarm were arrested, silenced and in one case ended up dead. The response was to deny and obfuscate, meanwhile the virus gained a foothold.

https://www.businessinsider.com.au/...stleblowers-speak-out-vanish-2020-2?r=US&IR=T

That is not to say that any other country has done a particularly good job either indeed the opposite is true since with very few exceptions it has't been done at all well. And to be clear, China is one place that did it reasonably well albeit after allowing the horse to bolt.

To the extent people wish to express their anger, and I see that as inevitable and there's no real point trying to stop it as such, my hope is that it's directed at governments not at innocent people on account of their race and not at some pangolin who had nothing at all to do with it.

If you're unhappy with Australia's response then direct your anger at the government not some random doctor, supermarket worker or security guard who's just following orders. Keep it civil however - use the pen or keyboard not the fist or gun.

If you're unhappy with China's initial covering up or that it happened in the first place then again the rational target of your anger is the Chinese government not ordinary Chinese people including those living in Australia. Just remember that Chinese Democracy isn't an actual thing, it's just the title of a CD from a band which previously asked you to Use Your Illusion.

With regard to this forum and pondering what may or may not happen, reality is that it's a niche forum which reaches a minority of the population. Joe would obviously like it to have more members and posts, as no doubt we all would, but reality is that at present ASF is a niche community and seems to be an intelligent one. It isn't prone to irrational panic or taking extreme views and as such I see no harm in discussing a scenario which may or may not unfold. Closing the ASX for a period would, after all, be comparatively trivial compared to much of what has already occurred and closing a stock market in a time of crisis certainly would not be unprecedented. It's not impossible for that to occur.

As for the shops and so on, that is in my view ultimately a failure of political leadership in Australia and in the West more generally (shops are being raided in other Western countries also). To that end, leadership in a time of crisis, and I say this aiming to be unbiased despite having previously lived there for many years, but I think the Tasmanian state government is on the right track.

Normal parliamentary debate has been suspended in the island state by mutual agreement between the parties and the government (Liberal) is operating with the full backing of Labor, the Greens and the only independent state MP on this issue. As such it's a united front - same message whether it's from the Liberals, Labor, Greens or the independent and focusing on how best to respond in a place that depends heavily on the tourism industry which has now been almost completely shut down. Adversarial argument is gone, state parliament is now effectively a war room. Not a bad response from a place with only half a million people and limited resources - the rest of the country would do well to copy that approach without delay.

https://www.themercury.com.au/news/...a/news-story/76eab202efbd591bc6bbfdefffd3a8d8

As I said, my comments are in no way personally aimed at anyone here.

 

[philliplee]

https://www.linkedin.com/pulse/changing-world-order-ray-dalio-1f

From Ray Dalio

 

[satanoperca]

https://www.linkedin.com/pulse/changing-world-order-ray-dalio-1f

From Ray Dalio

Now that is very interesting, given that I strongly believe that this situation was planned by a country, given the above readings it becomes even more clear, destabilize the world currency (USD) was part of the objective, it will be interesting to see how this plays out.