#4. Attribution Charts: Real Estate & Equities
This is China Charts. We are a pair of finance professionals with boots on the ground in China, each with 10 years of experience in the country. We love charts, mainly because of their ability to tell so much. In this newsletter we create and gather informative charts on the Middle Kingdom. Get in touch about custom projects on companies, data sets, or data visualizations.
I. Attribution Charts: Real Estate
Attribution charts. Recently we've been experimenting with visualizing a new (?) type of chart where one can attribute (hence "attribution chart") changes in a simple average to its constituents, i.e. what's pulling the average up, what's pulling it down. Here’s our first on China real estate prices. See if the chart can explain itself to you. To aid building intuition we’ve plotted a traditional time series in the bottom panel with the exactly same data. Hopefully, the attribution chart is much more punchy.
Attribution chart components:
Average of underlying constituents (black line).
Attributions (colored bars):
Constituent attribution can be above or below the zero line;
Attribution above zero = pulling average up;
Attribution below zero = pulling average down;
Constituent attributions sum to zero;
Small bars indicate low dispersion of constituents around the mean (they’re all close to the average);
Large bars indicate high dispersion of constituents around the mean (some can be very high above the mean, some very low below the mean).
So reading our real estate example above:
Tier 1 and New Tier 1 cities were pulling the average up;
Tier 3 and Tier 4+ cities were below the average;
Range expansion of colored bars indicate high deviations around the mean during this time. In short, performance of cities was not uniform.
Year 2016: Tier 2 cities joined the party above the zero line;
Year 2017: Bar ranges fall rapidly as performance of all cities becomes uniform and Tiers 1-3 abruptly decelerate.
If you’d like more content on China real estate, check out our previous post on property prices here.
II. Attribution Charts: Equities
Here’s an attribution chart by sector for China stocks listed on US exchanges. Black line is a custom index of all these stocks. Rebalanced monthly. Stocks listed <1year and those trading <$1M daily turnover are excluded. List of stocks and sector classification from USCC (U.S.-China Economic And Security Review Commission).
And here’s a close up of the same chart looking at only 2010 onwards:
And here’s a further close up of the chart from 2016 onwards:
Some of our personal observations:
China stocks have high beta:
The majority of the time the ranges of the attribution bars are small;
There is no consistent over- or under-performing sector.
Massive dispersion from 2020 onwards:
Volatility hits and sector performances differentiate;
Covid-19 and Archegos events caused major dispersion;
Consumer sector visibly underperforms (below zero line).
III. More Real Estate
Housing vacancy estimated using nighttime light from satellite imagery, data from 2018.
Tier 1 Residential gross floor area sold is declining. Perhaps we will see loosening in run up to Spring Festival (Chinese New Year, 2022-Feb-01).
Hong Kong rents are down significantly from high in 2014, so not entirely due to COVID-19. Though maybe a quarantine-free travel corridor with Mainland will help see a recovery.
Goldman says they are buying Chinese property developer credit. Yields on Chinese High Yield bonds have exploded.
IV. Stock Picking
Since we shared Goldman’s Common Prosperity basket (50) in issue #3, here is SocGen’s basket of 30 stocks from early September.
The regulatory “adjustments” in 2021 have created sector dispersion, as Reuters points out here.
We liked Samuel Shen’s chart so much, we created a composite index. It shows the equal weighted return of the winners and losers is around break-even.
Life science biotechs took a major hit Monday after Pfizer announced trail results for their COVID-19 antiviral.
Net injections turned positive for first time in Nov this week, after 5 negative days. Positive net injections signify looser monetary policy.
VI. Coal & Steel
Thermal coal prices are down 53% from their peak in October. Beijing’s policy moves were effective.
Coal production fell dramatically as coal prices rose (last 2021 data for September). We suspect steel production to be even lower in October and perhaps rebounding into the year-end.
While it looks like a large decline from the highest ever monthly levels in H1, on a cumulative basis 2021 is still the highest steel production year (YTD Sep30). A ranking unlikely to hold if infrastructure spend (loosening) doesn’t pick up by year-end.
Here is a normalized steel production going back 20 years. Note: (1) the massive ramp in the early 2000s, (2) the stability throughout the year in the early 20-teens, and (3) the mid-year decline in 2021 is unprecedented.
FT has (another) interesting graphic tracking executive share sales throughout 2021. We personally find insider share market purchases more interesting. We will watch to see if they (ever) buy back in.
With all the talk of Common Prosperity, we found this luxury forecast report interesting. The survey was thorough, worth a read if you follow the space. Here is a high-level graphic from the report.
Thank you for reading. If you like what we are doing please subscribe or share it with a colleague or friend.
Oh, and please follow us on twitter @RealChinaCharts and share with us any charts or datasets you find interesting.
China Charts Team