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Contents:

1. Real Estate

2. Net worth report

3. Demographics

4. Data security

5. PPI & CPI

6. US bank exposure to China, Energy storage forecast

I. Real Estate

We expect to see more easing into the end of the year.

Calling for stable housing sector is warranted, given the slow down and follow-on effects to distressed property developers.

It seems the recent policy relaxations are not enough for some developers.

Even property developers with cash have difficulty paying off debts.

Good graphic here detailing Trust firms exposure to Real Estate. Trust products are “shadow bank”-like source of funding for developers.

Real Estate Trust products are a larger percentage of total defaults this year, making it a difficult financing channel for property developers.

On the other hand, SOE property firms are not having problems issuing bonds.

As a result, China’s HY credit yields remain high. We expect any robust policy easing measures to result in (much?) lower yields.

II. Net worth report - McKinsey

China’s net worth as a multiple of GDP is 8.2, the high-end of the range.

A few points:

• The growth in China’s net worth-to-GDP began in the mid-90s. How sustainable are current levels?

• Japan entered a long slump after reaching 8-plus times GDP around 1990.

• The US’s net worth got to about 5x GDP in early 80s and pre-GFC, it didn’t last long.

Unsurprising China’s main driver of household wealth is… nominal home prices. Despite rent price growth of 76%, yields declined 66%. Let that sink in.

III. Demographics

Study from 1989 to 2015, shows in more recent years, fathers wages slightly decline post-childbirth. Add this to the pile of reasons “you can lead a horse to water, but can’t make it drink.”

IV. Data Privacy & Security

AIS position data is now deemed important to national security. Sorry for the analysts who relied on it. Freighters are much less worried about impacts. (AIS = Automatic Identification System. AIS supplements marine radar, which continues to be primary method of collision avoidance for water transport.)

V. PPI & CPI

China’s Producer Prices (input prices) have reached a series high in October. Note CPI has lagged significantly.

That spared (Producer Prices MINUS CPI) hit a new record. Expect industrial gross margins to be negatively impacted.

VI. Others

JPM Dimon’s commented that JPM will outlast the CCP, since walked back. Here are major banks’ exposure to China.

BNEF forecasted global energy storage installed capacity out to 2030. We will look into investment ideas in this space, stay tuned.

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Sincerely,
China Charts Team