The unsettling influence of China on Australian markets was again underlined yesterday.
The Aussie market rose sharply yesterday at the open, up more than 20 points in the first half hour or so as investors gave a muted thumbs up to the US Federal Reserve’s move to maintain its line on the next rate rise in America – not for a "considerable time”.
Then the monthly report on Chinese house prices was released, and the China jitters struck (as it has on a couple occasions this week with the fall in iron ore prices and weak industrial production data for August).
And down went the market, dropping more than 20 points in late morning/early afternoon trading, before investors recovered their poise and took the market higher, once again to end up 8.5 points.
And all through this, the value of the Aussie dollar hardly moved after its 1.5 cent fall overnight Wednesday, most of which occurred after the Fed released its normal post meeting statement.
The currency remained around 90.60 US cents.
The news from China wasn’t unexpected – what was a surprise was the more extensive pattern of price falls.
The report from the National Bureau of Statistics followed news last weekend of falling investment and slowing demand for homes.
On Wednesday of this week, news surfaced that the Chinese central bank had pumped $US81 billion of fresh loans into the country’s five biggest banks (effectively a cut in reserve ratios and therefore interest rates) to re-lend to the wider economy.
Yesterday’s report showed China’s new-home prices fell in all but two of the 70 cities monitored by the central government last month.
Prices dropped in 68 of the 70 cities in August from July, according to China’s National Bureau of Statistics.
Home sales dropped 11% in the eight months to August, despite signs of an easing on property purchase restrictions in some major cities.
Xiamen in southeastern Fujian Province is the only sampled city that saw month-on-month price gains in new home prices last month, compared with two cities for July and eight cities for June, the Bureau’s figures showed.
New home prices in Xiamen rose by just 0.2% from July, while new home prices in Wenzhou of east China’s Zhejiang Province were flat in August.
Hangzhou, the provincial capital of Zhejiang, saw new home prices dropping the most of the 70 cities, down by 2.1% from July. New home prices in Beijing and Shanghai dropped by 1.2% and 1.3% respectively, the Bureau said.
China housing gloom deepens
For existing homes, 67 major Chinese cities saw price drops in August, up from 65 cities in July, according to the NBS.
Bloomberg says around 37 of the 46 cities that imposed limits on home ownership since 2010 have now removed or eased their barriers to try and slow or reverse the fall in prices.
Property investment data released on the weekend showed further declines in sales and new construction along with a drop in mortgages, while growth in the production of housing-related goods such as home appliances, furniture and building materials such as steel and cement all slowed.
Housing sales in China in the first eight months of the year fell 10.9% to 3.43 trillion yuan ($US559 billion), following a drop of 10.5% in the first seven months of the year.
Last weekend’s figures show China’s industrial output grew at an annual rate of just 6.9% in August from a year earlier (when it rose 10.4%), slowing sharply from a 9.0% increase in July, and below economists’ expectations of 8.7% growth.
Crude steel production, an important indicator for Australia and the iron ore export industry, was also weak, rising just 1% from a year earlier but was down 0.9% from July to 68.91 million tonnes. Fewer apartment blocks are being built.
Fixed-asset investment, an important driver of economic activity, grew 16.5% in the first eight months from the same period last year, lower than forecasts, and well undr th 17% rate in the seven months to July.
And hinting at the extent of the slowdown, the government said fiscal revenue rose 6.1% year on year to 910.9 billion yuan ($US149.33 billion) in August, slowing from the 6.9% rise in July.
The Ministry of Finance said central government revenue reached 445.4 billion yuan, up 5.5% year on year, while local government revenue rose 6.6% to 465.5 billion yuan.
The pace of fiscal spending also slowed. In August, national fiscal expenditures was up 6.2% to 1.02 trillion yuan, down sharply from the 9.6% surge in July.
