Bulls strain at the leash on China retail results

Equity markets lately, while showing some long awaited stability, still have a tendency to swing like the breeze.

North, south, east or west, it could be any direction, and it could be at any rate of velocity.

One minute we are back on the “to infinity and beyond” trajectory, to paraphrase one of my favourite Pixar characters, while in another we are back in the midst of a Greek tragedy, which is not one of my favourite genres.

The world’s financial markets are generally struggling in a classic Bull versus Bear scenario, and at present the bull is edging more forward, albeit at a pedestrian pace, however, the bear, like the proverbial tortoise, is never that far away.

The resident ABC doomsdayer Stephen Long was recently at his very skeptical best, predicting the fire wasn’t out yet.

That would be the ABC approach though, wouldn’t it?

I personally hope that the United States works through its current woes and reclaims its position as global economic beacon.

This hope has been fanned by a number of indicators leaning towards a Chinese slowdown.

The construction super cycle is showing signs of a cool-down apparently, but it is very hard to read Chinese numbers.

US numbers are way more transparent.

There are some schools of thought which would argue that an American renaissance cannot happen without Chinese super growth.

I would argue that eight per cent Gross Domestic Product (GDP) growth is plenty for the American consumer, as is expected in the short term, for the Chinese.

Also, oft hyped rumours of Chinese buying Euro debt are helping any real meltdown.

But, there are mixed signals coming from China.

The city of Shanghai, China’s financial and business centre, saw a rise in its GDP of 8.2 per cent year-on-year to 1.92 trillion yuan ($304 billion) in 2011.

According to a report in China Daily the full-swing economic turnaround was attributed to Shanghai cutting its reliance on fixed-asset investment, heavy and chemical industries, real estate, and labor-intensive processing industries.

The fixed-asset investment in Shanghai rose 0.3 per cent year-on-year to 506.7 billion yuan.

The real estate sector dropped back to 5.3 per cent of the GDP last year, compared to 5.8 per cent in 2010.

Retail sales in Shanghai set the standard by growing 12.3 per cent annually.


The rolling 12 month change in Chinese retail sales domestically. Source: National Bureau of Statistics of China

The day by day ramifications of the markets are confounding.

One day we are back, then the next we are at the abyss. No wonder people have been pulling their money out of equities and managed funds, and going to fixed deposits.

Either way, in the current environment the bull versus Bear battle is very similar to the current recriminations within the Federal Australian Labor party.

In both instances we will know more in the next three months. My feeling is that the Bear and the Redhead will both lose out.