The credit data is not promising, and measures to rescue the real estate market in many places have failed. The sudden spring thunder indicates that the economy is recovering from the PMI value in February. However, the continued strict control of the real estate market and the peak of real estate trust redemption in March are like alarming thunder; there are also distinct contrasts overseas, as the European Central Bank has issued high expectations for LTRO2, but the Fed's QE3 has once again fallen through; which emerging market will fall first? 2012 may provide an answer.
In February, China's manufacturing purchasing manager index (PMI) was 51.0%, up 0.5 percentage points year-on-year, rebounding for the third consecutive month, indicating a gradual stabilization of the economy. However, the preliminary value of HSBC's February PMI fell to 49.7%, showing that small and medium-sized enterprises are still not optimistic.
In terms of open market operations, on February 28, the central bank restarted the 28-day positive repo operation and achieved net withdrawal, but the issuance of central bank bills has been suspended for nine consecutive weeks. In March, the amount of funds due in the open market is 254 billion yuan. With a reduction in fiscal deposits and moderate growth in foreign exchange reserves, liquidity in March will tend to loosen.
Foreign exchange administration data shows that the surplus of banks' customer settlement and sales of foreign exchange in January was $19.4 billion, ending the previous two months of deficits. The foreign exchange administration also published the bank's forward settlement and sales of foreign exchange situation for the first time. The bank's forward net settlement was $3.4 billion, indicating a strong expectation of RMB appreciation. Prior to this, in January, financial institutions' foreign exchange reserve increased after three consecutive months of negative growth.
This week, the central bank released a research report on the opening of the capital account, with steps divided into three stages. There are differences in the industry regarding whether the conditions for interest rate liberalization and exchange rate freedom must be fully mature before the opening of the capital account. It's easy to talk about it on paper, but practice still requires feeling the stones while crossing the river. Reports said that Shenzhen has been approved to launch personal cross-border RMB remittance services, but strangely, this report was denied by relevant departments. Why the low profile?
In the real estate sector, Shanghai emphasized on February 28 that it would strictly enforce housing purchase restrictions, meaning that the previous practice of "non-local residents holding Shanghai long-term residence permits for more than three years can enjoy the same home-buying qualifications as Shanghai residents" has been rejected. Before this, real estate rescue measures in Wuhu and Foshan all failed.
Therefore, it seems that the real estate regulation policy will continue to maintain a strict tone. However, the issue of small property rights houses may be resolved this year. The All-China Federation of Industry and Commerce suggests that in the near future, pilot programs for small property rights houses entering the market could be considered in first-tier cities with high housing prices.
According to the China Real Estate Index System data, the average price of residential properties in 100 cities nationwide in February was 8,767 yuan per square meter, down 0.30% month-on-month. The house prices in these 100 cities have fallen month-on-month for six consecutive months, with the largest drop since September 2011.
A clear contrast overseas appears between the European Central Bank and the Federal Reserve. On the evening of February 29, Federal Reserve Chairman Bernanke testified in Congress, lowering market expectations for additional quantitative easing policies. Thus, precious metals experienced a roller coaster ride, and the industry humorously referred to Ctrl+P (printing money) becoming Ctrl+Z (undo).
Bernanke mentioned paying attention to oil prices, which is understandable, as international oil prices have continuously risen with the ongoing fermentation of Middle East geopolitical tensions. The subprime crisis in 2007 was also driven significantly by rising oil prices. The U.S. economy is slowly recovering, and elections are imminent. I believe it will be difficult for oil prices to rise further. Recently, U.S. President Obama stated that he would strive to develop diversified energy sources to address rising oil prices. The U.S. is promoting an energy independence plan, and if the U.S. truly achieves energy independence, it will have a significant impact on the global political landscape. However, energy professionals believe that the independence plan is not feasible.
The European Central Bank announced its second round of three-year long-term refinancing operations (LTRO2), with a total scale of 529.5 billion euros, higher than expected. LTRO1 reduced the yield on government bonds of peripheral Eurozone countries, but what about LTRO2? On March 1, Greece's one-year government bond yield reached as high as 978%! It's truly a "Greek myth." Additionally, the Eurozone's manufacturing PMI in February was 49%, remaining below the 50% threshold for seven consecutive months. Will LTRO2 lead to a liquidity trap?
Sure enough, on March 1, the amount of overnight deposits at the European Central Bank surged by 30 billion euros within a day, setting a historical record. However, the interest rate for LTRO is 1%, while the overnight deposit interest rate is 0.25%. How long can it last? Are there no more bonds to buy?
LTRO merely postpones the debt problem. The European Central Bank gives money to banks through LTRO, and banks use it to buy government bonds, then use those bonds as collateral for the European Central Bank. You'll find that it's equivalent to the European Central Bank buying these junk government bonds. Worst of all, through the assistance of international organizations such as the IMF, European banks may escape the Greek debt problem like a cicada shedding its shell.
The industry believes that Europe's new risk is the "fiscal compact." Ireland is voting on whether to accept fiscal austerity, while the Czech Republic and the UK previously disagreed with joining the "fiscal compact," and other countries are also reluctant.
At the end of 2011, this column mentioned that India might be the first among the BRICS countries to collapse. But in the first two months of the year, India's situation seemed to reverse. Currently, India's inflation is as high as 9%, and the annualized economic growth rate in the previous quarter dropped from 6.9% to 6.1%, the lowest in three years. Moreover, Brazil had a large deficit of $1.29 billion in January, the first in two years.
The economic growth rate of the BRICS countries is declining, and trade deficits and capital outflows are inevitable. The wave of capital outflows at the end of 2011 may just be a rehearsal. Some even believe that the next global financial crisis will originate from China.
My view is that financial markets are full of non-linear results and random behaviors. From Latin America to Southeast Asia, few can escape the curse of emerging markets. We cannot decide whether or not the black swan will come, or when it will arrive, but having reverence, some understanding, and preparation may be the best comfort for the future. http://www.xyxdw.com/