Shaky markets in China after a near 90% jump; Indian shares up 84% since March; South Korea authorities worried that the Government stimulus packages has sparked an asset boom; Vietnam tightens credit, house prices rise from Australia to Singapore and beyond as Government spending rises.
Bank lending in China hits record levels, share floats see frenzied demand in Shanghai, Shenzen and Hong Kong, then selling as profit takers emerge.
Talk about decoupling: the Asia Pacific area is off on an economic whirl of its own, led by rebounding China and newly confident India, with honourable assists from government spending across the region.
Sluggish America, Europe and Japan have been left behind.
No wonder some markets in the Asia Pacific region resemble bubbles compared to those in the regions struggling to emerge from the slump.
Only Japan (see above) where the recovery is slowly emerging, hasn’t seen any sign of bubble or boom.
It, of all the major economies in the region seems closer to bust, but it’s recovering.
Central bankers are worried, as they must be. It’s part of their job description.
Australia’s frets about a housing boom getting out of hand if governments don’t move to increase the amount of land. And warns us we can’t assume the consumer boom will return to keep us buoyant and happy.
India’s lifts its inflation forecasts as the post election market surge continues, with the relatively dry monsoon period adding unwanted pressure on food costs. Already Indian sugar supplies are running low.
China’s central bankers continue the jaw boning they and other regulators have been doing for the past six weeks trying to get the state-controlled banks to rein in their madcap lending that saw the 2009 loan limit topped in the first quarter and all of 2008’s lending topped by the end of June, and then some.
It seems all the elements of a bubble are emerging, starting with China’s stockmarkets. The shake this week may have been a temporary bout of nerves, but it’s nevertheless a warning.
Wednesday’s 5% fall in Shanghai was followed yesterday by a small rise in overnight interest rates, for the first time in a week and the Chinese central bank sold 90 day notes at their highest yields for a year, indicating that someone, whether it’s the government, or the market itself wants things to cool.
After a 9 month ban, Chinese markets regulators have allowed new floats to start: there’s been a handful so far.
But the most spectacular came on Wednesday with China State Construction Engineering (It built the Water Cube in Beijing for last year’s Olympics) which soared on its first trading day in Shanghai after listing in the world’s biggest offering for over a year.
The shares jumped 90% on listing, valuing it at $US31 billion, which was higher than any of the other four IPOs in China so far this year.
It maybe China’s largest housing contractor, but that doesn’t guarantee it will be a success.
Other IPOs saw huge first day gains, and then started falling back towards the offering price as investors took profits.
Bloomberg pointed out that the IPO "values State Construction at 51.3 times 2008 earnings, the company said. The benchmark Shanghai Composite Index of 896 companies trades at 36 times earnings after surging 83 percent this year."
BBMG, the biggest cement supplier in Beijing, jumped on its first day of trading in Hong Kong as On Wednesday, then fell. It’s a going to be a favourite because of the story that it can participate in China’s $US585 billion stimulus spending boom.
With this sort of frenetic market activity and government spending sloshing around most economies unchecked, it’s no wonder the sober heads in central banks are getting anxious.
The Financial Times Lex column captured the fears (indeed, the mere mention of the word bubble in this commentary seems to have caught on straight away Wednesday and Thursday across the world).
"Bubble, bubble, toil and trouble. While most of the world is still focused on stimulating growth, Asian policymakers are increasingly fretting about new bubbles. Bank of Korea minutes released on Tuesday showed its concern about rising asset prices.
"On the same day the Reserve Bank of India raised its inflation forecast to 5 per cent – far higher than its medium-term 3 per cent goal – and signalled that it is no longer in pure stimulatory mode. Vietnam has already tightened credit.
"And China this week ordered banks to make sure their mammoth lending spree funnelled money into the real economy, rather than equities or real estate."
They missed Australia and RBA Governor, Glenn Steven’s musings about housing, inflation, consumer spending, the cost of credit, and Australia’s exposure to both the upside and downside of China’s boom.
House prices in Singapore and Seoul are estimated to have jumped 10 % to 40% in the past year or so, while their stock markets have climbed by 50%- 80% since March as both economies recovered quickly from the first quarter trough.
In India the main stock market&nb
