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As if the news out of Europe isn’t enough
these days to make investors squeamish, China’s little problem with
rising prices seems to be getting worse, not better.
This MarketWatch report
details some of the unintended consequences of the government’s latest
move to cool its housing bubble (emphasis added):
After a series of aggressive analyst forecasts for
property prices in the next two years, it appeared as if the government was
spurred into action. But
it seems to have pleased no one with its 15% stamp duty on all properties
bought and sold within six months.
At the same time, an executive at one of Hong
Kong’s largest property developers stoked the controversy by
unwittingly revealing the dynamics of local property as insiders see it.
Cheung Kong director William Kwok commented on Sina Weibo – a Chinese
version of Twitter – that its new Festival
City II development would not be affected by the measures. This incorrect
claim led to a complaint that he was misleading the public.
Some of his additional comments were possibly more
revealing about Hong Kong’s property market. “Quick quick quick … The world of speculation is welcoming you. If Hong Kong people do not buy, those
rich people from the mainland should buy,” said Kwok
before adding, “Merely
by the appreciation of yuan, one can make big
money. Hong Kong’s real estate [prices] can soar by 40
per cent in the future.
As is usually the case, those in the midst of a
financial bubble seem to be emboldened by initial government efforts to cool
things off, something that the Chinese government is no doubt learning
quickly.
In other news, the official government measure of
inflation is expected to come in at close to 5 percent this month as reported in Caijin and elsewhere. That should complicate things just
a bit for policymakers in the Middle Kingdom.
Tim IaconoIacono Research.com
Tim
Iacono is the founder of Iacono Research which provides market commentary and
investment advisory services specializing in macroeconomic analysis and
commodity based investing. He also writes the popular blog The Mess That Greenspan Made.
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