China again a big story/Sentiment/SNB cuts/Earnings comments, rising auto loan losses

For the 3rd day there is more moves by the Chinese authorities meant to put floor under its housing and financial markets and now they are using fiscal spending to help lower income people too (this fiscal news came out during our trading day yesterday). Firstly, Bloomberg News citing "people familiar with the matter" said "China is considering injecting up to 1 trillion yuan ($142b) of capital into its biggest state banks to increase their capacity to support the struggling economy." As to where the money would come from, "The funding will mainly come from the issuance of new special sovereign bonds." 

Secondly, on the fiscal side according to a statement from a Politburo monthly meeting, they will employ "necessary fiscal spending" in order to get to their targeted growth rate of about 5%. Part of this will be one time cash handouts. 

Thirdly, and where the biggest stress in their economy lies, residential real estate, this statement said the government should "promote the stabilization of the real estate market" and will focus on finishing unfinished projects and "improve land, fiscal, tax, and financial policies as soon as possible to push forward the new model of property development." They will also limit the building of new apartment projects in order to contain supply. 

The Shanghai comp rallied by another 3.6% and is finally in the green year to date. The Hang Seng was up by 4.2% and higher by 17% year to date and the H share index in Hong Kong bounced another 4.8%, extending its year to date gain to 23% year to date. The yuan is rallying too as are commodities. Copper is up by 2%, to the highest since mid July. Iron ore is up for a 3rd day, by 3%. 

Oil though is down on the FT story that "Saudi Arabia is preparing to abandon its unofficial oil price target of $100 a barrel as it prepares to increase output to win back market share, even if it means lower prices", and where the FT is "citing people familiar with the matter."

When analyzing the global economy and markets, put aside any distaste for the authoritarian government in China, the human rights suppression of some and the buzz kill of the historically vibrant entrepreneurial culture and remember that it is still the 2nd biggest economy and thus remains a major economic presence. The demographic challenges with a shrinking working age policy is something too we all know but I expect a rise in per capita income will mitigate this and the Chinese consumer will also remain a major economic driver, particularly as their middle class continues to increase in size, likely doubling in the coming decade. With respect to manufacturing, they are fast moving up the value add ladder, as seen by the most advanced EV industry in the world.