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					                                                                                                                                                                                                                                                    ARAB TIMES, WEDNESDAY, APRIL 27, 2011
    BUSINESS                                                                                                                                                                                                                                                                                           38

                                Saudi Electricity may revise investment plans                                                                                                                                   Karsan offers to build taxis in Brooklyn

    Saudi Electricity Co, the Gulf’s          50,000 megawatts now.                               tinue its $400 billion state invest-                          Turkish manufacturer Karsan has                      The city’s Taxi and Limousine                 Putting an auto assembly plant in
    largest utility, may change its 300          “We revised in 2010 and we                       ment plan — the world’s biggest                               promised to assemble cars in                      Commission will announce the win-             Brooklyn would be a step toward
    billion riyals ($80 billion) 10-year      made many projects earlier than                     stimulus relative to GDP — until                              Brooklyn if it wins New York’s “Taxi              ner “in the very near future,” a              addressing a lament commonly
    investment plan as it speeds up           planned,” Ali Saleh al-Barrak told                  2013 as planned, its finance minis-                           of Tomorrow” concession, poten-                   spokesman said.                               heard throughout the recession of
    delivery of its power projects to         Reuters in an interview.                            ter said in January.                                          tially returning auto making to the                  Karsan’s bid had gained notice             2007-2009: the United States has
    meet state infrastructure demands,           He said the company will stick to                   “Plans have been accelerated. In                           city for the first time in a century.             mostly because of its design for a            lost too many manufacturing jobs.
    its chief executive said.                 its investment programme for the                    fact we have to accelerate some of                               Karsan is a finalist along with                transparent roof for better sight-               The proposal to build Karsan
       State utility firm SEC has said it     time being but could revise it in                   our projects and make them come                               Nissan and Ford to build a taxi cab               seeing and a ramp that would                  taxis in Brooklyn was first reported
    planned to invest the funds in the        2013. “We will look at this amount,                 earlier than planned because of the                           that would replace the 16 models                  make it wheelchair accessible off             by the New York Daily News.
    10 years to 2018 to boost capacity        this amount could change based                      economic growth and the govern-                               now authorized, a contract estimat-               the factory floor. The Ford and                  “New York City was the manufac-
    to at least 80,000 megawatts by           on the market prices.”                              ment’s decision to build more infra-                          ed to be worth more than $1 billion               Nissan models are not wheelchair              turing capital of America in 1960.
    2020 from an installed capacity of           The Gulf Arab kingdom will con-                  structure projects.” (RTRS)                                   over 10 years.                                    accessible, the commission said.              (RTRS)

                                                                          global economic weekly
                                                                                                                                                                   Bank of America Merrill Lynch

China’s social housing program ‘wise move’
  This is the fifth part of Bank of                                                                                                                                                                              fear of a major economic slowdown,              cases.
America Merrill Lynch Global                 Global economic forecasts
                                                                      GDP growth, %                                  CPI inflation*, %                                      Short term interest rates**, %
                                                                                                                                                                                                                 but to prevent transfer of money from              Two types of “for rent”
Economic Weekly Report.                                                                                                                                                                                          bank deposits to property speculation,             There are meaningful differences
                                                                                     2009 2010F 2011F 2012F                2009      2010F 2011F 2012F          Current     2010F        2011F        2012F
                                – Editor     Latin America                                                                                                                                                       people’s expectations on home prices            between the two types of “for rent”.
              ❑     ❑    ❑                   Mexico                                   -6.1       5.5       4.0    4.5        5.3        4.2     3.8      4.0        4.50      4.50         4.50         5.00     need to be tempered.                            The first type is for urban households
                                             Brazil                                   -0.6       7.5       4.1    5.1        4.9        5.0     6.5      4.9       11.75     10.75        12.25        10.75        Home prices are still too far above          below poverty line. In Chinese, it’s
   Australia – shortfalls                    Argentina                                 0.9       9.1       7.0    3.5        6.3       10.3     9.7 13.0           11.25     11.08        15.00        18.00     government targets                              called “Lianzufang,”, and let’s just call
   As we noted in our recent fiscal pol-     Colombia                                  0.8       4.3       5.0    4.7        4.2        2.3     3.8      3.3        3.50      3.00         4.25         5.25
                                             Venezuela                                -3.3      -1.4       2.8    3.2       28.6       29.1    26.6 27.0           19.52     16.70        18.00        18.00        On 13 April, Premier Wen said that           it “cheap rental housing” by literally
icy report for Australia, household con-                                                                                                                                                                         home prices are still too far above the         translating its Chinese name. The sec-
                                             Chile                                    -1.5       5.2       5.9    5.5        0.4        1.4     3.5      3.4        4.50      3.25         5.25         5.75
cern about higher interest rates in senti-   Peru                                      0.9       8.8       6.5    6.0        2.9        1.5     2.6      2.7        4.00      3.00         4.50         5.50     government’s goal and people’s expec-           ond type, which is more in fashion
ment surveys has been overtaken by           Uruguay                                   2.9       8.5       6.0    5.0        5.9        6.9     7.0      6.0        7.50      6.50         8.50         8.50     tations. Home prices in some cities are         now, is for those neither too poor nor
tax and budget considerations. This          EEMEA                                                                                                                                                               too high and are rising too fast, despite       capable enough to pay the market rent.
will remain very much in the headlines       Russia                                   -7.9       4.0       4.8    4.1       11.7        6.9     9.1      6.1        8.00      7.75         8.25         8.00
                                                                                                                                                                                                                 falling transaction volume. The latest          It’s called “public rental housing”.
at both the federal and state level          Turkey                                   -4.6       8.3       5.3    5.5        6.3        8.6     6.9      7.4        6.50      6.50         7.25         8.75
                                             Poland                                    1.7       3.8       3.0    3.8        3.5        2.7     4.5      3.0        4.00      3.75         4.50         4.75     data support Wen’s assessment.                     How the social housing program is
through midyear and into the second          South Africa                             -1.8       2.8       3.3    4.2        7.1        4.4     5.4      6.0        5.50      5.50         6.50         8.00     ■ According to China Real Estate                funded
half.                                        Egypt                                     4.7       5.1       1.0    3.0       16.2       11.7    12.0 11.0            8.25      8.25         8.25         8.25     Index System, in March, home transac-              The construction of the 10 million
   The Australian federal budget is          Ukraine                                 -15.1       4.3       4.2    4.2       15.9       10.4    10.1      8.5        7.75      7.75         7.75         7.25     tion volume increased in m/m terms in           units of social housing would cost
delivered by Treasurer Swan on 10            Romania                                  -7.1      -1.3       1.5    2.5        5.6        6.1     6.4      3.5        6.25      6.25         6.25         6.75
                                                                                                                                                                                                                 70% of the 30 cities it monitors, but           RMB1.3- 1.4tn in 2010, according to
May. In the first eight months of the        Czech Republic                           -4.1       2.3       1.8    3.0        1.0        1.5     2.7      2.2        0.75      0.75         1.25         2.00
                                             Israel                                    0.8       4.5       3.9    4.5        3.3        2.7     3.3      2.8        3.00      2.00         4.00         4.75     declined in y/y terms in 80% of the 30          MHURC. There is some detail on the
fiscal year the Australian federal gov-      Hungary                                  -6.3       1.2       2.5    3.0        4.2        4.9     4.8      3.4        6.00      5.75         6.00         6.75     cities. In particular, it dropped 48% y/y       sources of funding. We need to take
ernment estimates that revenue is run-       Kazakhstan                                1.2       5.5       5.0    5.0        7.3        7.5     6.7      6.0        7.50      7.00         6.50         6.00     in Beijing. Home prices rose 0.6% m/m           these estimates with a grain of salt, and
ning $4.5bn below what is necessary to       GCC                                                                                                                                                                 on average in 100 cities, but dropped           the information provided is not enough
bring in its all important starting point    Saudi Arabia                              0.6       3.2       4.9    4.2        5.1        5.7     5.5      5.4
                                                                                                                                                                                                                 by 7.6% and 5.7 m/m, respectively, in           to solve the puzzle. The funding source
budget balance to target by June. Even       United Arab Emirates                     -1.4       2.0       2.8    3.1        1.6        1.0     2.8      3.2
                                             Kuwait                                   -2.2       2.5       3.1    5.0        4.0        3.0     4.0      4.2                                                     Shanghai and Shenzhen.                          are: RMB560bn from governments
that is optimistic because the 12-month      Qatar                                     9.0     13.3      13.0     7.5       -4.9       -2.9     2.5      3.5                                                     ■ Beijing Real Estate Trade                     (RMB103bn from the central govern-
moving sum of the budget balance is          Oman                                      0.8       3.8       3.7    4.0        3.5        4.0     4.1      4.0                                                     Management Network shows new                    ment) and RMB840bn from non-public
running worse than $20bn behind.             Bahrain                                   3.1       2.4      -2.2    2.9        2.8        2.5     3.0      2.7                                                     home prices in Beijing dropped 10.9%            investment (including RMB100bn loan
Another constraint is that Treasury is       Notes: Global and regional aggregates are based on the IMF PPP weights unless stated otherwise. Countries within each region are ordered according to these
                                                                                                                                                                                                                 y/y in March, to RMB19679/sqm, the              from China Development Bank, the
required to assume an unchanged cur-         weights.
                                             * Annual averages. The HICP measure of inflation is used for Euro area economies. ** Central bank target rate, year-end, where available, short-term rates else-    first decline in 19 months. In m/m              largest policy bank), bank loans to
rency over the four year forecast hori-      where. † US short-term rate forecast for 2008, 2009 and 2010 year end is 0-0.25%.                                                                                   terms, they dropped 26.7% from                  LGFVs, proceeds of housing provident
zon. Even so, it had been our view that      Midpoint used in table above for global and regional aggregation purposes. Source: BofA Merrill Lynch Global Research                                               February.                                       fund and private sector investment.
Treasury would revise upward its esti-                                                                                                                                                                              Wen’s solutions are: (1) to curb spec-          The greatest funding difficulty could
mate for projected resources rent tax                                                                            Bond yields forecasts                                                                           ulative demand; (2) to add supply of            be for social housing for rent, due to
(MRRT) collections for FY12-13               Quarter-end government bond yield forecasts                                                                                                                         both social housing and private homes.          the longterm investment horizon. Local
onwards because a further 10%                                                  Latest                    2Q11                    3Q11                  4Q11                  1Q12                                He urged local governments to take              governments need to structure the pro-
upgrade to terms of trade since the last     US                             3m Libor                      0.27                    0.30                  0.30                  0.35                      0.45
                                                                                                                                                                                                                 more responsibility in funding social           grams carefully to encourage invest-
Treasury review more than trumped the                                              2y                     0.70                    1.10                  1.50                  1.75                      1.80
                                                                                   5y                     2.13                    2.40                  2.75                  3.00                      3.10     housing.                                        ment from developers and non-public
further rise in the currency from about                                          10y                      3.42                    3.60                  3.80                  4.00                      4.25        China’s big push on social housing           entities. Insurance companies with
parity in November to 1.05 per USD                                               30y                      4.49                    4.65                  4.75                  4.90                      5.00
                                             Euroland                     3m Euribor                      1.33                    1.50                  1.75                  1.95                      2.05        After the pledge of constructing             long-term asset allocation needs have
now.                                                                               2y                     1.85                    1.85                  1.95                  2.00                      2.10     5.8mn units of social housing in 2010,          increased participation in social hous-
   However, “leaks” from Canberra                                                  5y                     2.72                    2.60                  2.68                  2.70                      2.80     China has set an even more aggressive           ing for rent. Pacific Asset Management
purport to suggest that it is far from                                           10y                      3.38                    3.20                  3.25                  3.25                      3.35
                                                                                 30y                      3.85                    3.60                  3.65                  3.70                      3.75     target of 10mn units of social housing          Co. has invested RMB4bn in
certain that expected MRRT revenue           Japan                          3m Libor                      0.20                    0.20                  0.18                  0.18                      0.20     construction in 2011, which could cost          Shanghai’s program, while an
will be revised upward and may even                                                2y                     0.21                    0.25                  0.18                  0.16                      0.20     about RMB1.3-1.4tn. In the five years           RMB10bn investment plan in Beijing
be revised down. We shall see, but if                                              5y                     0.54                    0.65                  0.45                  0.40                      0.40
                                                                                                           10y                    1.29                  1.50                  1.30                      1.20     of 2011-2015, China plans to build 36           by six insurance companies has been
that is the case the federal government      1.25                                                                                                                                                                million units of social housing, accom-         submitted for approval. In addition, the
would have even more work to do to                                                  20y                   2.06                    2.25                  2.05                  1.90                      1.95     modating 20% of its urban housing.              first investment fund of RMB10bn for
                                                                                    30y                   2.23                    2.35                  2.15                  2.00                      2.05
get back to surplus by June 2013. Our        U.K.                               3m Libor                  0.82                    1.00                  1.25                  1.50                      1.75     According to our estimates, social              social housing for rent could be
report also discusses softer retail and                                               2y                  1.21                    1.30                  1.60                  1.90                      2.10     housing construction could add 2.0ppt           launched soon. Investors would earn
housing trends in NSW, Victoria and                                                   5y                  2.33                    2.65                  2.85                  3.20                      3.35
                                                                                    10y                   3.61                    3.85                  4.05                  4.25                      4.35     to GDP growth in 2011.                          rents and government subsides, with an
smaller states like Tasmania which will                                             30y                   4.29                    4.50                  4.60                  4.65                      4.70        Today, few people in the markets             estimated yield of 5-12%.
require structural fiscal tightening in      Australia                         3m BBSW                    4.92                    5.30                  5.60                  5.70                      5.90     would doubt the Chinese government’s               Social housing program a buffer to
those jurisdictions as well, especially                                               2y                  5.02                    5.10                  5.40                  5.70                      5.70
                                                                                      3y                  5.16                    5.25                  5.50                  5.60                      5.65     determination to develop social hous-           FAI growth
with enhanced infrastructure projects                                                 5y                  5.36                    5.30                  5.50                  5.55                      5.60     ing. However, a year ago, it was wide-             The purpose of the current property
and debt issuance planned.                                                          10y                   5.58                    5.35                  5.50                  5.50                      5.60     ly believed that the call on social hous-       tightening is to stabilize home prices,
   No better in New Zealand                  Canada                                   2y                  1.77                    2.20                  2.70                  3.00                      3.30
                                                                                      5y                  2.69                    3.00                  3.40                  3.60                      3.75     ing would be another failed promise.            and the government aims to achieve it
   In the NZ mid year fiscal review last                                            10y                   3.31                    3.60                  4.00                  4.25                      4.40     We highlighted the need for more                by (1) curbing speculation, and (2)
December the NZ government fore-             Sweden                                 10y                   3.35                    3.35                  3.40                  3.45                      3.55     social housing with the publication of
                                             Norway                                 10y                   3.83                    3.85                  3.90                  3.95                      4.00                                                     adding supply of social housing, as
shadowed a cumulative $NZ12.2bn              Source: BofA Merrill Lynch Global Research                                                                                                                          Politics, Demographics and Public               well as private homes (as we men-
slippage in budget balances over the                                                                                                                                                                             Housing in May 2010.                            tioned above). It has no intention to
life of the forward estimates than antic-                                                                                                                                                                           However, markets are sceptical about         slow property investment growth.
                                                                                                                Monetary policy forecasts
ipated at the time of the May 2010                                                                                                                                                                               the social housing program scaling too          While private investment demand
                                             Key meeting dates and expected rate change (bp)
budget, and a steeper path back to bal-                           Current              First Hike        11-Apr              11-May            11-Jun             11-Jul             11-Aug      11-Sep          quickly and having funding difficulties         could be hurt by the ongoing tightening
ance from a prospective $11bn hole           Developed Markets                                                                                                                                                   and low profitability. To be sure, nothing      measures, the social housing program
(around 6%/GDP) in FY1011. In                Fed               0.00 - 0.25        +25 (Q3 2012)              27th                   –            22nd                   –                 9th        20th        is free (other than construction costs), as     provides a buffer to FAI growth and the
March, the NZ Treasury made further          ECB                      1.00        +25 (Apr 2011)       +25 (7th)                  5th       +25 (9th)                 7th                 4th   +25(8th)
                                             BoJ               0.00 - 0.10       +15 (Mar 2013)         7th/28th                 20th             14th              12th                  5th         7th        government-led programs usually are             growth of the economy. We estimate
sharp downgrades to growth to reflect a      BoE                      0.50       +25 (Aug 2011)               7th                 5th               9th               7th          +25 (4th)          8th        linked to inefficiency in resource alloca-      the 10 million social housing program,
disappointing 2H10 and its initial esti-     BoC                      1.00        +25 (Jun 2010)             12th          +25(31st)                  –       +25(19th)                     –   +25(7th)         tion, but a private property market may
                                             Riksbank                 1.50         +25 (Jul 2010)            +25               (20th)                 –                 –          +25 (5th) – +25 (7th)                                                         costing RMBB1.4tn, could contribute
mate for the impact of the February                                                                                                                                                                              have its own problems.
                                             SNB                      0.25        +25 (Jun 2011)                –                   –      +25 (16th)                   –                   – +25 (15th)                                                         2ppt to GDP growth in 2011.
2011 earthquake. This all implies that                                                                                                                                                                              The right FAI rebalances the econ-
                                             Norges Bank              2.00        +25 (Oct 2009)                –                12th     +25 (22nd )                   –             (10th ) +25 (21st)                                                            Preview:      Singapore’s       NOD
NZ will have a difficult tasking fram-       RBA                      4.75        +25 (Oct 2009)            unch                  3rd               7th               5th          +25 (2nd)          6th        omy                                             exports, BoT rate decision
ing its 19 May budget in a way that still    RBNZ                     2.50        +25 (Jun 2010)             28th                   –               9th                 –                   –        15th           Social housing is a big theme at a big
                                             Emerging Asia                                                                                                                                                                                                          Both Singapore's non-oil domestic
delivers balance by 2015 or 2016, a                                                                                                                                                                              time, and we need to see a big top-
commitment designed to fend off rat-         China (lending rate)     6.31        +25 (Oct 2010)       +25(5th )                    –                 –              +25                    –           –                                                        exports and Taiwan’s export orders
                                             Req. res. ratio*       20.00         +50 (Jan 2010)             +50                    –                 –                 –                   –                    down picture to understand and appre-           probably expanded at a significantly
ing agency downgrades and help the           India**                  6.00       +25 (Mar 2010)                 –          +25 (3rd)                  –              +25                    –           –        ciate it. In our view, the social housing
minority government get reelected in         Repo rate                6.75       +25 (Mar 2010)                 –          +25 (3rd)                  –              +25                    –           –
                                                                                                                                                                                                                                                                 slower pace, likely due to supply chain
                                                                                                                                                                                                                 program is a wise move by the Chinese           disruptions from Japan's earthquake.
November. It may not be impossible.          Cash res. ratio          6.00        +75 (Jan 2010)                –                   –                 –                 –                   –           –
                                             Korea                    3.00       +25 (July 2010)             12th          +25(13th)              10th       +25 (14th)                  11th         8th        government. When China’s national               We expect Bank of Thailand to raise
Tax revenue so far is holding up better      Indonesia                6.75       +25 (Dec 2010)       +25 (12th)                 12th               9th             12th                  9th         8th        savings is in massive surplus, develop-
than expected and the central bank has                                                                                                                                                                                                                           rates by 25bp to 2.75%.
                                             Taiwan                   1.75     +12.5(June 2010)                 –                   –     +12.5 (30th)                  –                   –           –        ing its social housing program seems a
somewhat stronger activity forecasts         Thailand                 2.50       +25 (July 2010)      +25 (20th)                    –        +25(1st)         +25(13th)            +25(24th)            –        far better deal than lending to the US.                    Emerging EMEA
than Treasury. Moreover Treasury itself      Malaysia                 2.75       +25 (Mar 2010)                 –          +25 (5th)                  –               7th                   –         8th                                                           EEMEA FX: diverging BOP flows
                                             Philippines              4.25            +50 (2011)            22nd                    –              3rd              15th          +25 (16th)          8th           In the short term, it could offset the
has recently reduced its figures for the     Latin America                                                                                                                                                       slowdown of private property FAI                ■ Review: This week's data confirmed
estimated impact of the quake on the         Brazil                 11.75         +75 (Apr 2010)      +50 (20th)                    –               8th             20th                 31st           –        growth, due to property tightening, and         the trends of deteriorating current
budget to $8.5bn and another $3bn for        Chile                    4.00      +50 (June 2010)       +50 (12th)       +25(12th) +25            (30th)               31st                31st +25(31st)          maintain growth. In the medium-to-              account and inflation data across the
                                             Colombia                 3.50       +25 (Feb 2011)        +25(29th)               (27th)      +25 (17th)         +25(29th)                  19th        30th                                                        region.
lost revenue growth. Even so it will be      Mexico                   4.50            +25 (2012)             15th                27th                 –               8th                26th           –        long term, it is the right FAI that can
a tough ask nonetheless and, like            Peru                     3.75       +25 (May 2010)        +25 (7th)          +25 (12th)        +25 (9th)                 7th                11th         8th        even better rebalance the Chinese               ■ Hot topic: Further developing our
Australia, much of the incidence will        Emerging EMEA                                                                                                                                                       economy than consumption. It may sig-           recent analysis of the potential impact
fall on local householders already fac-      Czech Republic           0.75       +25 (May 2011)                 –          +25 (5th)            (23rd)                  –               (4th)      (21st)                                                        of the end of QE2 on EEMEA FX, we
                                             Hungary                  6.00       +25 (Nov 2010)           (18th)               (16th)           (20th)            (TBA)                (TBA)       (TBA)         nificantly accelerate China’s urbaniza-
ing rising burdens from utility and          Israel                   3.00      +25 ( Aug 2009)       +25 (24th)          +25 (23rd)            (27th)            (25th)          +25 (29th)       (26th)        tion rate in coming years for a sus-            examine the diverging balance of pay-
petrol prices.                               Poland                   4.00        +25 (Jan 2011)             +25          (11th) +25              (8th)             (6th)        – +25 (7th)                     tained growth, by moving migrant                ments (BOP) trends.
   Preview: Five day weekend,                Romania                  6.25            +25 (2012)                –               (3rd)           (29th)                  –               (3rd)      (29th)        workers from dormitories and subur-             ■ Preview: The highlights of next week
                                             South Africa             5.50       +50 (Sep 2011)                 –              (12th)                 –            (21st)                   – +50 (22nd)                                                         will likely be from Poland where the
Australian CPI, RBNZ                         Turkey                   6.25         +25 (Jul 2011)          (21st)              (25th)           (23rd)       +25 (21st)           +25 (23rd) +25(20th)           ban slums to modern apartments. In
   With the four day Easter weekend          Note: Bolded data are expectations in basis points. “–“ denotes no meeting. TBA: MPC meeting not yet set. *Major five banks. **Reverse repo rate.                   addition, it stimulates demand for              market remains very uncertain about the
followed by the ANZAC Day holiday            Source: BofA Merrill Lynch Global Research, Central Banks                                                                                                           urban infrastructure and increasing             extent of monetary policy tightening in
on the 26th, Australia/NZ markets will                                                                                                                                                                           purchasing power of low income                  the pipeline: we get wages, IP, core CPI
be closed or thin for much of the fort-                                                                                                                                                                          households. And, it avoids slums,               and the NBP minutes.
night. The day after this spate of holi-     0.9%, 2.7% and 4.7%. Without wishing                  mode, following two consecutive rate                       Today marks the one-year anniver-                  redistributes national wealth and brings           Review
days the Australian quarterly CPI            to imply that the central bank’s 50bp                 holds. Singapore’s 1Q GDP expanded                      sary of China’s property tightening. A                about social stability.                            This week's data confirmed the
report is released. We are at the high       rate cut was politicized, it is also note-            at a stronger-than-expected 8.5% from                   year ago, we made our calls that (1)                     Composition and types of social              trends of deteriorating current account
end of expectations at 1.5% q/q. Apart       worthy that in a recent speech the                    last year.                                              Property tightening is real this time; (2)            housing                                         and inflation data across the region.
from seasonal first-of-year rises in         RBNZ governor talked up the positive                  ■ Hot topic: April 18 marks the one-                    The Chinese government is determined                     China’s social housing could be put          Both Poland's and Turkey's current
some items, higher fresh food and            impact on the economy from higher                     year anniversary of China’s property                    to make a big push on the social hous-                into three categories: for rental, for sale     account deficits -- which are those we
petrol prices will bite. The lagged          terms of trade. More than in the past,                tightening. A year ago, we made our                     ing system; and (3) FAI growth will not               and for rebuilding shanty towns. For the        worry about most -- widened further,
impact of a higher currency will be a        the governor was appreciative of the                  calls that: (1) Property tightening is                  slump as a result. (Click here). Our                  10 million units planned for 2011, the          even though Poland's infamous errors
suppressant, but it is worth noting that     role that the higher currency plays in                real this time; (2) The Chinese govern-                 calls seem still robust.                              breakdown is about 2 million homes for          and omissions contracted substantially;
the AUD/USD average only rose from           “delivering the benefits of the rising                ment is determined to push forward                         Strengthening enforcement of                       sale, 4 million for rental and 4 million for    the quality of funding is deteriorating
0.99 to 1.005 between 4Q10 and 1Q11,         terms of trade to the community at                    aggressively its social housing plan;                   property tightening                                   rebuilding of shanty towns.                     as well. Meanwhile, inflation came in
and in this instance would have been         large – through higher wealth and                     and (3) FAI growth will not slump as a                     The Chinese government is deter-                      Two types of “for sale”                      higher than expected -- and higher than
overwhelmed by higher world prices           cheaper imports.” Still, in this decision             result. Today, our calls seem still                     mined to curb home prices and has                        Before the official initiation of social     previously -- in Hungary, Poland and
for raw materials.                           the RBNZ will not want to flag any                    robust, after examination of the latest                 recently toughened its tone on property               housing in mid-2010, the central gov-           Romania. However, most of the upside
   RBNZ decision last before govern-         future unwind of the 50bp rate cut, in                developments. We also provide more                      tightening. We won’t see many further                 ernment did have various programs to            continues to come from food and ener-
ment budget                                  part because it will want to see the                  details on social housing, and explain                  new property tightening measures, but                 provide subsidized homes for sale.              gy, while passthrough to core inflation
   The 28 April rates announcement,          degree of fiscal austerity in the John                why profitability is not a major factor                 enforcement will be strengthened until                Local governments charge below-mar-             seems to remain well-contained.
which follows the 50bp quake-related         Key/Bill English budget.                              in China’s decision to advance its                      the government sees a clear sign of                   ket prices for their land sales, impose         Meanwhile, inflation remained very
cut on 10 March, does not include a full                   Emerging Asia                           social housing program.                                 falling home prices in top-tier cities                limits on home sizes and regulate home          muted in the Czech Republic. Price
monetary statement but is the last deci-        China: One-year anniversary                        ■ Preview: Both Singapore's non-oil                     and the stabilization of prices in other              prices. According to the Ministry of            action suggests that the market consid-
sion before the NZ budget. Recently,         property tightening                                   domestic exports and Taiwan’s export                    cities.                                               Housing and Urban-Rural Construction            ered the Poland surprise favoring more
NZ Treasury reduced its estimates for        ■ Review: The Bank of Korea tem-                      orders probably expanded at a signifi-                     When inflation pressure is high, con-              (MHURC), social housing for sale                rate hikes that would be PLN positive;
NZ real GDP growth in FY1011,                porarily paused and left interest rates               cantly slower pace, due to likely supply                trolling home prices becomes even                     could be divided into “economic hous-           however, our view remains that too
FY1112 and FY1213 to 0.8%, 1.9%              on hold at 3.0%. Bank Indonesia also                  chain disruptions from Japan's earth-                   more important, as that is an important               ing” and “double-limit (on size and             much is priced in, and we remain posi-
and 4.2%, respectively. A week later         left the rate unchanged, but appears to               quake. We expect Bank of Thailand to                    substitute for rate hikes. The govern-                prices) housing”, though we believe it’s        tioned for lower PLN-HUF.
revised RBNZ forecasts were higher:          be shifting into an extended pause                    raise rates by 25bp, to 2.75%.                          ment cannot hike rates too quickly, for               hard to tell the difference in many                      To be continued tomorrow