China’s new way. China is adopting perhaps the most novel way seen around the world in the past century in trying to control its continuing sharemarket rout. After throwing the credit of the state at the collapse (via the central bank lending money to ease the pain from margin call-related selling) and a raft of other measures — including an interest rate cut and a reduction in the reserve asset ratio, which would allow banks to lend tens of billions of dollars to brokers, and investors — the increasingly desperate Communist Party government of President Xi Jinping has ordered the market to shrink itself.
That’s right, shrink itself. And at once, it seems, thereby reducing the number of listed shares able to be traded. So far (as of last night) a total of 940 of China’s 2800 companies listed on the Shanghai and Shenzhen exchanges have simply suspended themselves in the past three or four days, including more than 200 yesterday morning, and another 173 last night, after the close of another bad day, which had the Shanghai market close down 1.3% (after being 5% or more lower in trading) and the Shenzhen market lose more than 5%. The suspensions have frozen trading in shares with a market value of a further US$1.4 trillion. Shrinking the number of companies whose shares are able to be traded won’t solve the problem, only concentrate the selling and increase the volatility. — Glenn Dyer
Flashy car boom continues. Pssst, don’t tell those “experts” in the business media and commentariat who reckon retail sales and household consumption generally are weak, but the great Australian car boom continues, or rather, the great Australian luxury car boom is showing no sign of stopping (except for one of two marques). In fact, too many people wonder and worry about property prices in Sydney and Melbourne, and have failed to spot the most obvious trend associated with that boom — the surge in sales of super luxury cars. The Merc is now the biggest selling luxury marque in the country, with sales in the June half year up a very solid 19%. Audi sales jumped 17%, BMW sales were up 16.1%, Aston Martin sales up 17%, Maseratis up 83%, Ferraris up nearly 83%, and Lambos up almost 76%.
Interestingly, these cars are not going to investment bankers in the same quantities they did before the GFC, nor are they being sold to stars in great numbers. The models being sold in rising numbers are favoured by your flashy real estate agent or mortgage broker. According to the latest car industry figures for June and the first half of the year, the sales of luxury and near-luxury cars grew 3.3% in the six months to June, and most, if not all that growth came from the booming sales of luxury and near-luxury models and not the usual volume sellers (and the strong sales growth in these top of the range models came despite the weakening Aussie dollar). And because most of the faster growing models are expensive, the government’s small business tax write-off had little impact on sales. Looking at the bread-and-butter sales, Toyota’s first-half sales were only up 0.6%, while Hyundai eked out a 1% increase. Ford sales dipped 17.6%, Holden sales were down 8.9%, Nissan sales were off 0.6%, Mitsubishi sales were up nearly 10%, and Volkswagen sales jumped more than 12% in the half year. And Chinese-made cars recorded big sales slides. Great Wall sales fell more than 90%, while Chevy sales plunged over 50% in the half-year. — Glenn Dyer
Now that’s what I call a lake. Anyone for a swim? Unlike the infamous wine, butter, lamb and olive oil lakes of EU fame, and from years gone by, the US is sitting on a fair dinkum bourbon lake as we speak. Kentucky’s bourbon stock has hit a 40-year high (as at the end of 2014) — that’s 5.7 million barrels according to the Kentucky Distillers’ Association. There are as many barrels of bourbon as there are residents of the greater Sydney area. That was after 1.3 million barrels of bourbon were produced, the highest level output since 1970 (what a headache). It’s the third year in a row that a million or more barrels was produced. The last time this many barrels were in storage was back in 1975, when 5.8 million barrels were held in warehouses and distillers across the US. Sales of bourbon fell in subsequent years as consumers moved to white spirits (vodkas and rums, such as Bacardi, and wine). But they have rebounded in the past 15 years (ever since George Bush was elected president in 2000). Stocks in 1999 were just 485,000 barrels. The Distillers’ Association say its members are investing US$1.3 billion (over A$1.7 billion) to expand production and storage facilities because of the revival in demand for bourbon (Kentucky bourbon and Tennessee whiskey). The association says production of bourbon in Kentucky has jumped 170% since 2000. Exports of both bourbon and Tennessee whiskey topped US$1 billion last year and together generated revenues of US$2.7 billion in 2014. — Glenn Dyer