Wednesday, August 11, 2010

China bank update-China money supply/loans-Chinese economy has shown moderating growth since 2Q;Monthly steel production in China declined another 4% m/m $CAF

images · China money supply/loans - M2 money supply rose 17.6%oya in July, while new loan creation eased modestly to RMB532.8bn in July, compared to RMB603.4 bn in June. Seasonally-adjusted, the pace of monthly gain in M2 has eased rather notably, to rise at 0.4% m/m in July, with the pace of gain in the sequential trend moderating to 13.1% 3m/3m, saar

China bank update – from JPMorgan’s S Chen - Foreign media Reuters and Bloomberg reported that CBRC may order banks to take existing trust credit assets onto their balance sheets by the end of 2011.  As we highlighted in our report China banks: the myth and reality of banks' trust products in China published on 16 July, 2010, the majority of bank trust products have short maturity.  Provisioning and capital pressure is largely irrelevant: While industry data suggests over Rmb1T in loan-related trust products have been sold to retail investors, the outstanding balance has barely changed from 2009 year end, as most credit issued in 2009 matured by mid-2010.  Insignificant additional capital pressure: We do not expect this to add pressure to trigger more capital-raising.

· China - July CPI inflation rate came in at 3.3% oya (J.P.Morgan: 3.2%; consensus: 3.3%), translating into a rise of 0.3% m/m, sa

· The Chinese economy has shown moderating growth since 2Q, and July indicators suggest that the steady moderation in growth momentum has carried on to the current quarter. Industrial activity and fixed investment growth continued to ease steadily, along with the monetary normalization and policy curbs targeting at the property market and local government investment activities. On the production side, IP rose at 13.4% oya in July (J.P.Morgan: 13.5%; consensus: 13.4%), compared to 13.7%oya growth in June

· China Steel - Monthly steel production in China declined another 4% m/m to 51.7mt while the y/y growth rate slowed to only 2.2%. This is the second consecutive monthly decline in steel output in China. While the decline was slightly lower than we were looking for at 5%+, the trend is still in the right direction for supporting steel prices in our view.

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