On 6 may, a major drop in the number a shares of the leading directorship, which has been closing for seven months, meant that the idea of a 28 per cent conversion of institutional investors was completely frustrated, while at the same time indicating that the market had been expected to undergo a fundamental shift in the process of crowding out the bubble. The prices of the buildings are high and the first-line cities are experiencing a sharp decline in their trade prices. Unless there is a major reversal in policy, real estate prices cannot leave gravity。
Is china in an unprecedented bubble? The monetary doctrine is that last year's high credit, combined with continued low interest rates and rising pressure on the rmb exchange rate, made the market a breeding ground for a bubble in assets. The reality, however, is that the stock and building markets in china are in a downward spiral, and the asset bubbles that arise from low interest rates have not emerged。
The withdrawal of global liquidity was the main cause of the collapse of the stock. The failure of the 28 conversions in the stock market and even the fact that there were no 28 conversions in the stock market, i. E., the switch between large and small stock shares, is entirely an assumption of some institutional investors。
First, the real economy has not recovered strongly. At a cost of more than $2 trillion, the united states was unable to enter a strong recovery path. The employment rate in the united states is a windfall, and the current general employment rate in the united states is considered to be high. Non-farm employment in the united states is likely to rise by 180,000 in april, up from 162,000 in march. The bad news is that the weekly reports issued by the united states department of labor indicate that as of the week of 3 april, the number of first-time applications for unemployment assistance had increased by 18,000. Even worse, the us adp’s unexpected decline in private sector employment, the increase in short-term freelancers, the census’s temporary employment of 600,000 people, will soon become part of the job-seeking workforce. The conclusion, of course, is that there has been no fundamental improvement in employment in the united states and that the current increase in manufacturing investment and de-stocking are not stable。
From the united states to china, monetary liquidity in response to the emergency began to withdraw. The clear conclusion can be drawn that in 2009 so many currencies could still not fill the global financial black hole and that the size of the virtual economy in the past was far greater than we thought。
Asset bubbles are melted like icebergs. In the past year, before the real estate market, large commodity markets had become the windfall of the asset bubble, and commodity prices had not hesitated to go up in the absence of real demand. The same is true for the weak recovery of the economy, but the bulk of the commodities have long gone down. On 5 may, the overnight dollar index reached 12 months of high, while the basic metal market experienced a collective collapse, with the lme copper line falling by $7,000 at one point, reaching 5. 18 per cent; and domestic commodities fell collectively yesterday. Since late april, large commodities have experienced a sharp fall, with no signs of stability。
The decline in demand in china is the root cause. The chinese demand factor in resource prices has been overshadowed by efforts by the chinese government to squeeze the asset bubble. Industry sources have pointed out that the spread of the european debt crisis has led to a sustained rise in the dollar index, while real estate regulation and austerity expectations in china have also led investors to fear that demand for metals will fall below expectations, thereby squeezing metal prices, and that large commodities will enter a volatile period in the future。
The same is true of the stock market, where the sovereign debt crisis has intensified and where major european and american stock markets have collapsed. As at 4 may, the three major united states indices had fallen by more than 2 per cent, with the nasdaq index falling by almost 3 per cent; on the european side, the greek stock market had collapsed by 6. 7 per cent on tuesday and the portuguese, spanish, german, paris, london and other stock market indices had fallen sharply。
The decline in demand in china was mainly due to a setback in real estate and investment. China’s real estate downturn became the trigger for the global asset bubble. In a low-interest market environment, asset prices have declined significantly, as professor mischkin of columbia university has described asset prices as mutually reinforcing with credit, and as an image of de-leveraging a shrinking balance sheet. In an urgent need to pay off debt, or to reserve more cash (so-called “runs to safety”) or “de-leveraging”, businesses and individuals are desperate to sell assets, forcing them to continue to decline。
This will happen in china's real estate market. The 2009 annual report was published in march by publicly listed housing companies, bringing the total net profit of 86 enterprises to $34,715 million, of which 19 registered an increase of more than 100 per cent each year. The top 10 real estate listed companies, claiming to be “no less expensive”, held cash totalling $121. 7 billion at the end of last year, with a total debt of $42 billion. It will take 15 years to pay off the debt with the profits of 2009. Once the prices of land and property in their hands begin to decline, it means that their debt ratio is in disguise rising, so stop bragging about money, which is a mirage in the housing asset bubble. Heading for a housing firm will soon enter a difficult time of repairing balance sheets。
There are three long-standing misconceptions in the area of investment: first, that the real estate market is dominated by demand and supply, and that housing is in demand, so that it does not fall sharply; second, that surplus funds will be converted from the building market to the stock market, which will be good for the stock market; and third, that excess liquidity will have to be addressed by higher interest rates. The current market has broken these soap bubbles once and for all。
As long as real estate and financial equity are not bubbled, so-called capital market stock-style changes are not understood by investment market patterns, either with ulterior motives or without seeing the market. The conclusions drawn are clear, and china does not need to increase interest rates at this time。
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