This week it is back to the growth data again. There is also focus on second-quarter earnings season in the US this week. 20% have reported so far – what is the biggest disappointments and biggest surprises?
Senior Strategist Ib Fredslund Madsen with his take on this weeks most important financial events.
Video courtesy of en.jyskebank.tv
By ForexAbode.com
After some struggle against the 55-day EMA, GBP/USD ultimately broke that resistance and closed above it. The high of this upward move was 1.5282.
GBP/USD retracements and 55-day EMA
Isn’t it interesting that this high where some resistance was seen was also the 50% Fibonacci retracement of the downward move from 1.5751 to 1.4813? Not only this level brings in the resistance of the 50% retracement but is also slightly below 1.5304 which had proved to be a strong resistance earlier.
But what if both these resistances are broken?
GBP/USD retracements and 200-day EMA
If both these resistances are broken then the next level will have the combined forces of the resistance of 61.8% retracement and the 200-day moving average. The current 200-day SMA is at 1.5404 i.e. just 22 pips above the 61.8% retracement level.
Longer view of the price action w.r.t. the 200-day moving average
Lets also have a peek into the important economic releases from the U.K. and The U.S. during the last week.
Recent Economic Releases
U.K.
GBP: Consumer Price Index: Year on year CPI 2.9% was slightly less than the expected 3.0% but was better than the previous 2.7%. The core CPI was same as the consensus of 2.3% and slightly better than the previous 2.2%.
GBP: Producer price Index: Year on year PPI for Input was 2.2% and positive as compared to the consensus (1.9%) as well as the previous 1.2%. PPI Core (output) was 1.0% and though slightly less than the consensus of 1.1% but was better than the previous 0.8%. The year on year PPI for Input was same as the consensus of 4.2% and quite better than the previous 1.8%.
GBP: Claimant Count: The change in June was -21.2K and was better as compared to the consensus (-8.0K) as well as the previous -16.2K. The claimant count rate came down to 4.4% from the previous 4.5%.
GBP: Average Earnings Including Bonus (3 months/year): 1.7%, positive as compared to the consensus (1.4%) as well as the previous 1.3%.
GBP: ILP Unemployment Rate: no change from the previous 7.8%.
GBP: Retail Sales (YoY): 2.2%, positive as compared to the consensus (1.7%) as well as the previous 2.1%. Year on year retail sales ex-fuel was 2.1% and though better than the expected 1.6% but was less than the previous 2.3%.
GBP: Public Sector Net Borrowing: GBP 10.234 billion and though more than the consensus of GBP 9.450 billion but was better than the previous 12.770 billion British pounds.
U.S.A.
USD: Retail Sales: Month on month change was 0.4% and negative as compared to the consensus (0.8%) as well as the previous 0.5%. Same was the case with retail sales ex-autos which was 0.0% against the consensus of 0.4% and previous 0.3%.
USD: Consumer Price Index: Year on year CPI 1.8% and positive as compared to the consensus a(1.5%) s well as the previous 1.4%. Year on year CPI ex food and energy was same as the consensus of 1.6% and slightly less than the previous 1.7%.
USD: Net Long-Term TIC flows: USD -27.2 billion, negative as compared to the consensus (US$ 14.3 billion) as well as the previous -21.8 billion US dollars.
USD: Industrial production (MoM): 0.3%, positive as compared to the consensus (0.2%) as well as the previous 0.0%.
USD: Housing: Housing starts were 0.836 million and hence negative as compared to the consensus (0.960 million) as well as the previous 0.928 million. Same with the building permits of 0.911 million against the consensus of 1.000 million and previous 0.985 million.
USD: Initial Jobless Claims: 334K, positive as compared to the consensus (345K) as well as the previous 358K.
USD: CB Leading Indicator: 0.0%, negative as compared to the consensus (0.3%) as well as the previous 0.2%.
USD: Philadelphia Fed Manufacturing Survey: 19.8, quite positive as compared to the consensus (7.8) as well as the previous 12.5.
Comparative weight on the basis of last week’s economic releases:
What can we Expect
By touching a.5282 the currency pair has completed the 50% retracement of its fall from 1.5751 to 1.4813. Though the strong jump has strengthened the short-term bullish outlook but please note that the resistance came exactly at 50% retracement level. Not only that but this level is just below 1.5304 which had proved to be a strong resistance on July 3rd 2013. Because of these facts we will remain neutral till any decisive break over 1.5304 does not take place.
On the upside if there is a decisive break of 1.5304 then we will expect further gains towards 1.5392/1.5404. As indicated in the above mentioned alert, this zone is expected to be a very strong resistance because of the combined powers of the 61.8% retracement, 200-day moving average and also the approaching psychological zone of 1.5500 level. Even if the pair manages to break this resistance zone a stronger resistance will be expected near 1.5477
On the downside support should come neat 1.5171 where the 38.2% retracement of the above mentioned fall should now act as support level. Any decisive break of this support will be the first sign of topping but even in that case we would expect a strong support near/above 1.5027. In case the support near 1.5027 does not hold then the focus will turn back towards downside for a move to retest the 1.4813 or possibly below that.
GBP/USD outlook is also available at ForexAbode.com
Connect with the author at Google: +Himanshu Jain.
We’re just one misstep away from another recession!
At least, that’s what many in the financial media would like us to believe, with headlines like USA Today’s “U.S. Economy isn’t Yet a Pretty Picture” and The Wall Street Journal’s “Global Tumult Grips Markets.”
Heck, even overeducated analysts are in on the act. In recent research reports, PIMCO’s top brass keeps referring to the current economic environment as a “stable disequilibrium.”
I guess that whole “new normal” and “death of equities” thing wasn’t working out for them (I told you so) with the S&P 500 Index up by double digits and all.
In any event, whatever you do, don’t believe the hype! We’re not even close to another recession.
And seeing that it’s Myth-Busting Monday, here are five irrefutable signs to prove it…
Rates Rising Ahead of the Fed
In anticipation of a formal hike from the Federal reserve, investors shouldn’t be freaking out over rising interest rates on U.S. Treasury bonds. They should be celebrating.
Why?
“When rates rise, it is a reflection that the economy is recovering,” says Morgan Stanley’s (MS) CEO, James Gorman. And he’s absolutely right.
Contrary to conventional wisdom that rising rates will undercut this economic recovery, it’s actually a sign that the economy is getting back to normal and won’t need the Fed to prop it up much longer.
The sooner we can get off the Fed sauce, which we’ve been drunk on for months, the better.
Pennywise, Finally
A recent Bloomberg article suggests that consumer spending makes up 70% of the U.S. economy. Of course, we know the real number is closer to 40%.
Either way, consumer spending is still a big deal.
The good news? Americans learned their lesson from the Great Recession. We’re finally living within our means.
The latest data from RBC Capital Markets reveals that the correlation between wages and purchases during the recovery is the highest it’s ever been since 1965.
“The consumer really has cleaned up their balance sheet… They’re growing consumption based on the rate of growth of their earnings, which at the end of the day builds a more solid foundation,” says Jacob Oubina, Senior Economist at RBC.
Oubina adds, “We’d like to see a little bit more credit usage, because it’s been non-existent.”
Speak for yourself, Mr. Oubina! Too much credit is what got us into this whole mess to begin with. I’ll start worrying when consumers are quick to swipe the plastic. Thankfully, that’s not happening now.
Raising the Roofs
For years the real estate market has been a drag on the U.S. economy. Specifically, residential fixed investment (RFI) detracted from GDP growth. But not anymore!
In the first quarter, RFI increased 14% to account for almost one-fifth of overall economic growth.
As you can see in the chart, this isn’t an anomaly, either. It’s a clear reversal in the trend.
Since 1947, RFI accounted for an average of 4.6% of GDP. But even after the most recent uptick, it’s only running at about 2.6% of GDP. So that means there’s much more building to be done before we even get back to normal.
It’s Sunny in Philly and New York
If the economy is in such trouble, somebody forgot to let manufacturers (and economists) know. I say that because the two latest manufacturing reports came in way ahead of expectations…
In July, the Empire State Manufacturing Survey hit 9.5 and the Philadelphia Fed Manufacturing Index hit 19.8. (Keep in mind, any reading above zero signals expansion.)
No economist expected it to be that sunny.
The median projection of 50 economists for the Empire State reading checked in at just 5, whereas the median projection of 57 economists for the Philadelphia Index was only 10.
Much Less Joblessness
While no one can say that the labor market is healthy, it’s definitely improving. Case in point: New applications for jobless benefits dipped to their lowest level in four months last week.
Scott Brown, Chief Economist at Raymond James, says, “This [level] is consistent with moderate job growth.” Agreed. And it’s way better than the 650,000 jobless claims we witnessed at the peak of the unemployment crisis.
It’s also important to realize that the number of applications for jobless benefits serves as a proxy for layoffs. So the drop indicates that companies aren’t cutting back on workers. In fact, the total number of layoffs over the last six months was the lowest since 2000.
Yes, the unemployment rate is still uncomfortably high. But, again, the labor market is on the mend, which is a sign of economic strength.
Bottom line: The U.S. economy is on solid ground, not quicksand. If you’re still not convinced, consider that the two most reliable recession indicators on Earth aren’t flashing any warning signals, either.
Ahead of the tape,
Louis Basenese
The post Five Signs That the U.S. Economy isn’t on the Brink of Collapse appeared first on | Wall Street Daily.
Article By WallStreetDaily.com
Original Article: Five Signs That the U.S. Economy isn’t on the Brink of Collapse
Stocks in Asia were seen traded mixed after the Japanese Prime Minister Shinzo Abe won the upper-house elections on Sunday, as China‘s central bank decide to liberalize interest rates .
Hong Kong’s Hang Seng dropped 0.16% to 21, 3328.35 at the time of writing, while the Chinese Mainland Shanghai Composite declined 0.23% to 1,988.08 at the same time.
The Nikkei 225 rose 0.47% higher at 14,658.04 at the time of writing, while the broader Topix closed at 0.38% high at 1,216.53 at the same time.
Australia’s S&P/ASX 200 gained 0.51% high, closing at 4,997.40, while the South Korean Kospi closed 0.48% higher to 1,880.35.
Over the weekend, the Prime Minster Shinzo Abe won the majority of the seats in the upper-house election, handing over the control over both houses to Abe, which will support his efforts to restore the country’s economy.
Shares in China were seen dropping, following the announcement of the People’s Bank of China (PBoC) , loosening the rules of lending, with a low bench-mark rate.
“This will support the real economy and improve economic restructuring and upgrading,” the PBoC representative said in a statement.
In Japan, Sony Financial was seen 3.18% higher, while Mitsubishi declined 4.10%.
In Hong Kong, the Chinese Resources Power rose 5.46%, while the coal miner China Shenhua Energy lost 3.90%.
In Australia, contracting company Leighton Holdings gave up 4.88%.
The post Asian Stocks traded mixed on Abe’s victory appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
Shares in Europe opened positive on Monday after the release of the better-than-expected results, with investors focused on reports from the region’s major companies.
The pan-European Euro Stoxx 50 gained 0.11% to 2,719.18, as the German’s DAX rose 0.20% to 8,347.71. The French CAC 40 advanced 0.80% to 3,928.52, as the UK’s FTSE 100 was up 0.05% to 6,633.80.
The Portuguese intended exit from its bailout program was expected by next year; however it could be due to the stalemate over further reforms.
Portugal’s President Anibal Cavaco Silva said that he wanted the center-right coalition government to remain at its current position to keep the bailout on track.
Electronic manufacturers Philips net profit rose from previous record of 102 million euros to 317 million euros, according to the reported second-quarter results.
While the Swiss bank Julius Baer reported the better-than-expected results for the first half of year, recording its net profit up by over 25% at 261 million Swiss francs, exceeding analysts’ forecast of 238 million francs.
In Asia, stocks were traded mixed following the news that Japan’s Prime Minister Shinzo Abe’s Liberal Democratic Party won majority of the 121 seats in the upper-house election over the weekend.
Meanwhile, the People’s Bank of China (PBoC) announced to loosen rules for lending, allowing bank loans to be made at a low rate.
The Chinese Shanghai Composite declined 0.61% to 2,004.76, while In Hong Kong; the Hang Seng advanced 0.07% to 21,376.51 at the time of writing.
The post Europe Share opens green after earnings appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
Our technical trading expert, Murray Dawes, would say the Aussie index is back at the point of control.
That’s fancy technical analysis talk to say the index is halfway between the top and bottom of the recent high-low range.
That’s always a difficult time for investors. Do you follow the trend, hoping the share market will go higher? Or do you bet on this being the end of the trend and cash in your chips?
Well, if you believe the US market still leads the way on stocks there may only be one answer…
The Financial Times reports:
‘After a shortlived drop last month, US equities have rebounded smartly, propelling major benchmarks to record peaks this week.
‘The move has been accompanies by robust flows into US equities, with more than $2bn per day being pumped into exchange traded funds alone so far this month. Putting this into perspective, US equity ETFs in July are currently attracting nearly four times the inflows we saw during the first half of the year.’
There is always some correlation between the US and Australian markets.
Sometimes it breaks down for a short time, but the link soon resumes. Take the six weeks from mid-May. US stocks fell about 6%, while Australian stocks fell 10%.
And yet, since both markets bottomed out in late June, each has rebounded in lockstep — the US stock market has just hit a new record.
Put simply, whatever short-term hot topics burst on the scene, one thing is clear: as far as markets are concerned, the US still leads the way and the Aussie market follows…
At the moment, the companies in the S&P/ASX 200 index are trading at a price to earnings (PE) ratio of 13-times. To put that in context, that’s around the 10-year market average.
Now, some folks will say that’s proof the market is about to fall. After all, if the market trades above the average then it must be over-priced. You wouldn’t believe the number of times we see that line trotted out…usually by people who clearly have no understanding of the concept of averages.
An average is always somewhere between the high and low point — that’s why it’s an average. That means if everything lines up as we hope, stocks could still go higher, especially if Aussie stocks perform better than the market expects.
But there’s also something else to consider, and that’s the likely further downward trend of Aussie interest rates.
When interest rates were higher, investors would have a set limit on the amount they’re willing to pay for a share — historically around 13-times earnings. They knew if they paid more it would impact their returns compared to other investments — say, bank deposits.
But now, interest rates are lower. That could cause investors to pay more for stocks. If so, it could push PE ratios higher…and therefore share prices too.
We understand it’s a risky argument. It’s fair to say most investors still haven’t got the hang of it because bank savings rates are still above 4%.
But if savings rates drop below this level, that could put a different spin on things.
Even without that, there’s reason to be optimistic about stocks. Remember, the stock market is always a forward-looking indicator. The big institutional investors are always thinking about where companies will be in the future, not where they’ve been in the past.
That explains why Australian stocks are still 40% below the 2007 peak. Investors have built in a whole lot of (justified) negativity. And now they’re waiting for that negativity to pass.
Here’s the thing. Remember what we said, investors are looking ahead. They’re trying to figure out how good (or bad) the economy will be 12 months from now. Based on the recent performance of the market, most investors aren’t that optimistic.
If they were optimistic, stock prices would be much higher. The fact they aren’t tells us that most folks have already factored that into the market.
So when you start to see positive news return, you better be ready to be a part of it, because stock prices could take off in a flash. In fact, odds are stock prices will start rising before that as investors look for ‘green shoots of recovery’.
Look at the US market. No-one in their right mind would suggest the US economy is sitting pretty. Detroit has filed for bankruptcy, and the US Federal Reserve is still printing billions of dollars each month to buy government bonds.
And yet US stock prices are at a record high. Why is that? That’s right, investors are looking ahead. They’re looking ahead to low interest rates, more money printing or an economic recovery…or all three.
None of this is to say the Aussie and world economies are without problems. If you’ve read Money Morning for long enough you’ll know we disagree with all forms of intervention in the markets.
But we also know that whether we agree with it or not, and regardless of the long-term impact, intervention and artificially low interest rates do help stock prices in the short term.
So if your goal is to make money from investing (whose goal isn’t?), it’s important to understand this and exploit it. If the US market can hold near these highs into the end of the year it could be the spur that takes the Dow Jones Industrial Average towards 20,000 points.
And if the US market takes off, there’s no doubt in our mind the Australian share market will follow. The time to buy stocks is when few others are positive about the future…that’s now.
Cheers,
Kris+
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From the Port Phillip Publishing Library
Special Report: The Sixth Revolution
Daily Reckoning: The Dark Side of Technology
Money Morning: Money Weekend’s Technology FutureWatch 20 July 2013
Pursuit of Happiness: The Dark Side of Technology
‘One ought never to turn one’s back on a threatened danger and try to run away from it. If you do that, you will double the danger. But if you meet it promptly and without flinching, you will reduce the danger by half. Never run away from anything. Never!‘ – Winston Churchill
It’s with the words of Winston Churchill in mind that we need to confront an issue that will exist as long as we continue to drive forward as a connected, technologically advanced world. The issue we face lurks in the shadows and underground movements of the technological world we live in.
It’s the dark side of technology…
There is ‘world ending’ potential that innately comes with great tech breakthroughs and innovation. It’s those that twist technology with the potential for good to be an instrument of evil and to take part in illegal, criminal activity that we must be aware of.
It’s the epitome of good vs. evil, Skywalker vs. Vader.
You only need to watch the daily news or head down to the local cinema to see how the world will end up when technology takes over. Rise of the Machines, Big Brother, HAL9000, The Matrix…all (fictional) examples of technology spreading evil and atrocity.
Typically we paint a rosy picture of the future. We think technology will bring revolutionary change to the world. The benefits of technology will far outweigh the perils and dangers that are so often the focus of people’s mindset.
However, it would be remiss of us not to delve into some of the potential dangers of technology. And thus in understanding the good that comes from tech, it’s important to understand the darkness that also comes with breakthroughs and innovation.
To paraphrase Churchill, don’t run from it, confront these issues and you might have a part in making sure the future of our world sides with the good technology can bring, not the dark side.
One fact of life you need to get your head around is if you have a computer is this: according to the annual Norton Cyber Crime Report (NCCR) there’s a 66% chance you have already experienced cybercrime. That figure will grow over time. It’s rational to say if you use a computer you will experience cybercrime at some stage in your life.
That’s serious. You will experience cybercrime. Maybe they should change the famous saying to, ‘There are only three certainties in life, death, taxes and being hacked.’
The NCCR also estimates in 2011 cybercrime fleeced the world of over $110 billion. Let’s break that down a bit further.
Every second of the day 18 people fall victim to cybercrime, that’s 556 million people per year. If it takes you 10 minutes to read this essay, 10,800 people will have been victimised by some form of cybercrime.
And cybercrime comes in some innocuous forms. Most cybercrime operates silently, through malware, viruses and trojans. (These are all types of little bugs that silently sit in your computer and provide information to their creators, hackers.)
You might see it as an email from ‘Canadian Pharmacy‘ or possibly an email from a lawyer in Nigeria claiming you’re entitled to a multi-million dollar estate. At the other end of the spectrum, you might be a direct target. Your bank account defrauded, your identity stolen or your website hacked.
Scammers send over 75 million scam emails every day. And every day about 2,000 people fall into the trap.
But when it comes to your online security there’s actually a pretty easy solution to it all. Have strong passwords and some level of online security.
It’s that simple. Have a difficult password with both upper case and lower case letters and numbers. Do that and you greatly decrease your risk of becoming another cyber victim.
It will take a hacker over 438 times longer to crack a six digit password with upper case and lower case letters and numbers, than a password with just lowercase letters.
However as strong as your security might be, there’s a situation where no matter what you do, no matter how much security you have, if hackers want your information bad enough, they’ll get it.
And we’re not talking about some well-paid teenager in a warehouse full of computers in the backstreets of Moscow. (Most people think the US and China have the most active hackers. Russia actually has more hacks originate from it than any other country in the world.)
We’re talking about hackers that sit inside the walls of the civil service. We’re talking about government employed hackers, spooks, and spies. If they want information they’ll comfortably find a way to get it.
You might have heard of the US National Security Agency (NSA) and their PRISM program. Effectively PRISM is a monitoring project with the NSA taking information about everyone from the data servers of Google, Facebook, Yahoo, Microsoft and other major tech companies.
If it wasn’t for the now infamous whistle blower Ed Snowden we’d all still be none the wiser. And the NSA would continue on their merry way watching everything we do online. Note: There’s a pretty good chance they’re still doing it anyway.
But it’s not just American government agencies that are proficient in monitoring their citizens. Have you ever received a letter or email from the Australian Tax Office (ATO) saying you haven’t declared interest from one of your online savings accounts? We have, and so has Kris. It concerns us how the ATO knows we had $2.63 in interest in the 2011-12 financial year.
It’s the same deal when e-Tax asks if you want to pre-fill your tax return. Pre-fill? With what information? Oh, just our income, interest, purchases and sale of stocks, Medicare info, etc. The list of information the Australian government has about us is profound. And disturbing. If you think your information is private, you’re wrong.
With that in mind, when the government asks you to voluntarily part with your information for research or for maintenance, tell them to bugger off.
One more point on online security and privacy. You need to treat your mobile phone and tablet as a portable computer. Meaning you need the same security measures to protect yourself on the go.
If you ever connect to a public Wi-Fi network make sure you’ve got high level security. When you use public Wi-Fi, you may as well be a Millwall fan walking into a West Ham pub…you will be attacked.
So be smart, have different passwords, make them difficult, and don’t open any emails from Nigerian Lawyers. Also be discreet with how much of your own information you hand over to government departments. It will go a long way to protecting you online.
But the dark side of technology isn’t just about cybercrime and the pitfalls and perils of living in an interconnected world.
And tomorrow we’ll highlight two more terrifying aspects of the Dark Side of Technology that you need to be concerned with. One word of caution until tomorrow’s part two; don’t think about anything illegal, or you might find you’re incarcerated before tomorrow. And just keep an eye on your neighbours…
Sam Volkering+
Technology Analyst, Revolutionary Tech Investor
From the Archives…
Why Invest ‘Hard’ When You Can Invest ‘Easy’?
19-07-2013 – Kris Sayce
Read This Before You Buy Another Stock or Bond…
18-07-2013 – Murray Dawes
Could Uranium be the Best Investment in 2013?
17-07-2013 – Dr Alex Cowie
Asteroid Mining and the Commercialisation of Space
16-07-2013 – Sam Volkering
Why the Australian Share Market is Heading Even Higher
15-07-2013 – Kris Sayce
By Profit Confidential
Long-time readers of this column know of my affinity for railroad stocks. I like keeping things domestic; I like keeping things simple; and I like consistent growth—in revenues, earnings, and dividends.
Railroad stocks are benchmarks on the North American economy. What they report is real, definitely worthwhile noting, and a sort of canary in the coal mine for both the old economy and Main Street.
My top benchmarks and my two favorite railroad stocks are Union Pacific Corporation (UNP) and Canadian National Railway Company (CNI).
Another good one, CSX Corporation (CSX), which is based in Jacksonville, Florida, has 21,000 miles of track in 23 states, the District of Columbia, and two Canadian provinces. It reported solid earnings results that beat the Street.
It’s important to remember that a company like CSX is a mature business; you’re not going to get burgeoning biotech-like earnings growth from railroad stocks.
CSX reported a solid earnings of $535 million, or $0.52 per share, up about four percent nominally and six percent on an earnings-per-share basis from $512 million, or $0.49 a share, in the comparable quarter.
Revenues came in at $3.069 billion for a gain of about two percent from revenues of $3.012 billion in the second quarter of 2012.
The company’s cash position dropped approximately $360 million to $1.017 billion. Shareholders’ equity grew $660 million to $9.662 billion.
The company cited strength in chemical shipments and the continuing upward trend in railroad stocks. From the 2013 base, CSX expects to generate per-share earnings growth of between 10% and 15% through 2015—that’s a very solid expectation.
Railroad stocks started to soar just before the subprime mortgage-induced financial crisis took hold. But like everything else, they corrected significantly, and then they accelerated again into what can only be described as major Federal Reserve/Wall Street capital gain. While modest, there is real growth in mature railroad stocks.
Practically, it’s difficult to consider buying these stocks today after such significant capital gains from most positions within the group.
I always recommend thinking long-term and being cyclical when thinking about accumulating railroad stocks. (See “How Extraordinary Growth in Bakken Oil Is Revitalizing Railroads.”)
Comparatively, Union Pacific and Canadian National have been standouts in terms of their stock market performances within the group. Canadian National is one of Bill Gates’ largest holdings in his private investment firm and his charitable foundation.
I recognize that not everyone has an affinity for such old economy stocks. They definitely are a throwback to another era. But if anything, railroad stocks are worth following for the simple reason that they are the backbone of the economy and what these corporations say about their businesses is material to the stock market and your own outlook.
Article by profitconfidential.com
By Profit Confidential
I know many of you probably don’t even look at Chinese stocks anymore. I wouldn’t be surprised given the years of fraudulent reporting by numerous China-based companies that decided to come here and steal your money through deception.
The reality is that the flow of new Chinese initial public offerings (IPOs) to America is dead. Whether that flow will be revived is anyone’s guess, but I’m not betting on it, at least not until Chinese companies are subject to a similar audit process faced by U.S. companies. That’s in the works with the U.S. Securities and Exchange Commission (SEC).
For now, China is struggling to hold onto its gross domestic product (GDP) growth, which came in at 7.5% in the second quarter. But I wonder if we can trust that number as accurate or if it’s some fabrication by the Chinese government. Based on what we have seen, you never know.
But I still consider China to be the top growth area in the world and a place where you should have some capital invested, albeit carefully. (Read “China: The New Breeding Grounds for Capitalism.”)
What’s interesting is that China is undergoing an economic transformation under the leadership of its new government, which took control earlier in the year. The strategy is to focus on driving up domestic consumption and relying less on exports and foreign investment.
So far the shift to the new paradigm appears to be working, as domestic consumption has been rising, helping to decrease the dependence on foreign demand.
In June, retail sales surged 13.3% year-over-year, according to the National Bureau of Statistics. (Source: “National Bureau of Statistics of China: Total Retail Sales of Consumer Goods in June 2013,” 4-traders.com, July 16, 2013.)
The report indicated that retail sales in the urban markets jumped 13.0% in June and accounted for a whopping 86% of total sales. Sales in rural areas increased 15.1%.
Those readings show the importance of the urban markets; but they also suggest that consumer spending in the country is expanding at a faster clip, as the government puts in programs to increase the wealth of the rural regions.
If President Xi Jinping, who is widely known to be a reformer, can deliver on his vision of a much richer China for all of its citizens, then the economic opportunities in the country will only get better—not only for its citizens, but also for foreign companies and investors.
Article by profitconfidential.com
