With Chinese stocks continuing to trade lower today and continue to trade at levels not seen since 2009 on concerns of a continued slowdown in the Chinese economy then today was definitely conformation of that. With reports from the China Securities journal over the weekend highlighting that corporate profits for listed companies on the Shanghai and Shenzhen stock exchanges only grew 6.75% in 2012 versus 36.14% for 2011.
Furthermore reports from Xinhua a Chinese news agency that:
“Construction and building materials companies saw their combined first-half net profits shrink 28.67 percent from one year earlier”
The report goes on to say:
“Aggregated net profits at eight steel companies that have unveiled their interim reports dropped by 68.49 percent year on year”
The profits of the biggest state owned enterprises (SOE) in china fell 13.2% from a year ago in the first seven months of 2012.
The question on most minds would be is China slowing faster than we would hope they are and brings into the discussion the possibilities of a hard landing and not a soft landing. The one sure thing from comments by Premier Wen Jiabao he has expressed the urgency of exports, growth and also highlighted the concern that yes China is slowing rapidly.
Putting this into context maybe markets are running on the smell of new money and quite possibly getting ahead of the game as there clearly are signs that the global economy continues to show weakness. Just maybe the recent run up is buy the rumor and sell the fact! For the moment expect to see Gold continue to move higher in the lead up to Jackson Hole and the possibility at the September FOMC of another round of QE combined with prospects of a China stimulus as well.
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