Recap 11-20-12




  • Overnight, Moody’s downgrades France’ Govt Bond rating to Aa1 from Aaa
  • MSFT: Win8 sales "well below internal projections"
  • An NYTimes article suggests that China’s new economic minister is not likely to help reform the economy.
  1. Zhang Gaoli, the little-known Communist Party secretary of Tianjin joined the new seven-member Politburo Standing Committee last week
  2. Mr. Zhang has emerged as the man expected, after approval by the National People’s Congress in March, to handle day-to-day management of the Chinese economy.
  3. As the Yujiapu project makes clear, Mr. Zhang has been a defender of huge government-guided investments,
  4. Selling real estate is crucial to the deeply indebted city. Total credit issued in Tianjin grew faster than anywhere else in China during the economic stimulus program in 2009 that led the country quickly out of the global financial crisis.
  5. Jones Lang LaSalle, a global real estate services firm, estimates that available commercial real estate in central Tianjin will double in the next four years. In the new financial district 30 miles from downtown Tianjin, the first dozen office buildings will have the combined floor space of four Empire State Buildings. Many Hong Kong developers with investments here are worried about a glut of office space.
  6. Mr. Zhang personally ordered two little-known tax breaks that have led as many as half of the country’s private equity funds to transfer legal residency and some offices to Tianjin, either to the nascent financial district or areas nearby, finance experts said. Mr. Zhang reduced business taxes for private equity funds based in Tianjin and nearly halved the income tax rate for limited partners in those funds.
  7. Mr. Zhang, who earned his bachelor’s degree in statistics and started his career in the oil industry, has succeeded in assiduously building close personal ties to Mr. Jiang

BoJ left policy unchanged as expected. Vote was unanimous.

  1. The Bank continues to conduct monetary policy in an appropriate manner. (WTF?)

The IMF is prepared to list the AUD and CAD as new reserve currencies, the first time it has touched the list since the ’99 introduction of the euro – WSJ

RBA minutes: “Members considered that further easing may be appropriate in the period ahead.”

RBA Governor Stevens had an interesting speech on the Australian Dollar. Key items:

  1. the terms of trade have peaked, and will probably have fallen by about 15 per cent by the end of this year.

  2. So while a high level of the terms of trade continues to add to the level of national income, we can no longer expect that a rising terms of trade will be adding to growth in living standards. We are entering a new phase.
  3. The peak in this build-up [in
    mining investment] lies ahead. It has, for some time, been our expectation that it will occur in 2013 or 2014; that expectation seems to be firming up.

  4. While it’s not surprising that the Australian dollar has been very strong given the terms of trade event we have had, it is surprising that it has not declined much, at least so far, given that the terms of trade peaked more than a year ago. A lower exchange rate would, of course, need to be accompanied by a pace of growth of domestic unit costs below that seen for much of the past five years, in order to maintain low inflation.

Upcoming Data:

  • Wed: BoE Minutes, US Jobless Claims, Markit Preliminary PMI
  • Thu: US Holiday, EU PMI , Canada Retail Sales