90 seconds at 9 am: China debt review

90 seconds at 9 am: Labour Party wants foreign buyers banned; China to review public debt; Kiwi tipped to head RBS; NZ$1 = US$0.808 TWI = 76.0

29th Jul 13, 8:47am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news the opposition Labour Party has announced policies to ban most foreign buyers from the residential housing market.

This week we get some big data that may well move markets. On the docket is a Fed meeting, central bank decisions in Europe (EU and UK), US payrolls and unemployment, and the early look at US Q2 growth. China's official PMI results will be in there too.

Expectations are that none of these will surprise markets. In fact the US data is expected to be pretty positive.

For New Zealand however, we need to keep a special eye on the slowing trends in China.

China has announced an urgent review of public debt amid concerns that burgeoning official borrowing is adding to stress in China's financial system.

Another item of note: Kiwi Ross McEwan, an ex ASB, and CBA manager looks like he is in line to head up the giant Royal Bank of Scotland.

McEwan lost out to fellow Kiwi Ian Narev for the top spot at CBA in late 2011. CBA has assets of NZ$835 billion and 45,000 employees, RBS has assets of NZ$2.6 trillion and 141,000 employees. The big difference though is that RBS is a distressed bank that had to be nationalised during the GCF and is looking for a new leader to bring it out of public ownership.

Gold starts the week at US$1,320/oz and the Dow starts up at 15,552.

The NZ dollar opens at 80.8 USc, 87.3 AUc, and the TWI is at 76.0.

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7 Comments

by Boatman | 29th Jul 13, 9:45am 1375047911

Has anyone in Labour thought this through? It appears not, and their plan is somewhere between dilusional and wishful thinking .

It transpires that only 11000 Title deeds in NZ are in the name of foreigners ( I assume these are non -residents) .

There is no way that such a small number of foreigners bringing investment money here could push Auckland's house prices up to the stratospheric levels that we now see.

And , these foreigners are not stupid , they have made their money by being astute, are not given to overpaying for anything, and they could even be seeking a return on their money in excess of the bank rate . They are monied , often intelligent, and investment savvy people who understand the dynmaics of the market

Maybe Labour should look at the real causes of this mess, such as land supply constraints in Auckland , ridiculous development contribution levies that add from $100k to $200k to a single section , cheap money and an immigration policy skewed in favour of wealthy migrants

by Henry_Tull | 29th Jul 13, 10:10am 1375049413

its the punters mind set

its a good old bubble and will run until the money stops (the banks are happy to let it run) - refer the story where banks now let family and friends pay your mortgage..... lol - offset (and with luck they can be swept up to gtee too).

http://www.interest.co.nz/news/65612/offset-mortgage-market-starts-attr…

Family members who agree to link their Westpac accounts to "help you pay off your home faster" essentially give up their interest earnings on thos accounts.

- gets round the need for rising incomes....

< loan approval form > < tick >

by Learn to Socia… | 29th Jul 13, 10:16am 1375049804

The numbers of foreign buyers is not really relevant, it is the values and attitudes that they bring. Imagine a place like Bali where local people buy and sell houses to each other for, say, $2,000 (I am making these numbers up). Suddenly, young Aussie/Nz surfers who are in Bali for a couple of weeks, realize that they can buy a beautiful house in Bali for what they could save in a few weeks working in the Aussie mines- so they buy a house, or a couple of houses or even a bakers dozen (13) houses! Why not? Why wouldn't you?$?- cheaper than a second hand car! - You have a cool place to visit for a couple of weeks and can rent it out to other surfers the rest of the time.

Now look at it from the perspective of the local people. Suddenly your $2,000 house's value is being set by Aussie/NZ surfers earning $3,000 a week driving trucks at an outback iron ore mine. Say there are 1,000 houses in a villiage- all of which had been bought and sold for about $2,000 amongst the locals over many years. Say $2,000 is an affordable price for local young farmers, and a fine price for local sellers. If one of those houses sells to a visiting surfer for $80,000, then sudenly every house in the villiage is potentialy salable for $80,000. Only a fool would sell a house to a young local couple with a new baby for $2,000. The point is that a relatively small number of buyers from off-shore can drive house prices through the roof for the local people.

by waymad | 29th Jul 13, 10:34am 1375050869

Oh, it's much, much worse.

The higher price paid once, anywhere, creates the higher value expectation in an entire area, pro-rata over new and old houses alike. and these higher values are actionable intel: one can take them down to the bank and demand cash, quite legally.

And bankstaz being remunerated by interest revenue streams and value of loans written, are not gonna stand aginst this tide....

by Henry_Tull | 29th Jul 13, 9:48am 1375048103

We help farmers farm without debt...

http://inputcapital.com/Investor-Centre/company-information.html

http://inputcapital.com/Investor-Centre/corporate-presentation.html

Funding and finance repayments without capital gains, part of the food for all story, with fewer moving parts in the operation.

Nothing about nitrates....

by Basel Brush III | 29th Jul 13, 10:16am 1375049818

Boatmans says:

And , these foreigners are not stupid , they have made their money by being astute, are not given to overpaying for anything,

There is lots of cash sloshing around the world and some of it appears to have ended up in the hands of devious operators. Real estate is a wonderful home for laundering.

If being astute is being cunning and devious, I would agree and you do not mind overpaying if it all came too easily in the first place.

by steven | 29th Jul 13, 1:21pm 1375060906

GMO quaterly letter,

"the only scenario under which treasuries do “well” is one with outright deflation! In essence, in the absence of a strong view on deflation, you neither want to be long, nor short, treasuries. You just don’t want to own any."

Yet a lot of ppl are in treasuries...

ho hum.

http://www.gmo.com/America/

regards