Monday, 13 February 2017

China Car Sales for January stronger than expected

As expected sales for the first month of 2017 are down from December's record highs

A range of factors were expected to contribute to a dampening of data. The Chinese New Year was almost a week earlier I believe, many people therefore had their holidays around 7-8 days earlier than last year (my holiday came much earlier) and when that happens hundreds of millions of people travel the length and breadth of the country to return home to be with their families (or fly somewhere warm for two weeks). As a result major cities and economic / business hubs become deserted and the streets are literally deserted. It's not unusual in China, it happens every year, but at different times according to the Lunar Calendar. Results were also impacted by the anticipated removal of tax breaks late last year which was a major reason for record sales in December.

"Total Vehicle Sales in China decreased to 2520000 in January from 3057300 in December of 2016. Total Vehicle Sales in China averaged 925965.41 from 1997 until 2017, reaching an all time high of 3057300 in December of 2016"

Note the following article talks about car sales GROWTH and not actual month-to-month comparison. January sales still way up on 2016 as the chart from the link above suggests. Otherwise a bullish write-up. Yale Zhang, managing director at consultancy Automotive Foresight, said January’s sales figure was better than market forecasts, as analysts expected a decline in year-on-year sales because of the Lunar New Year holiday.

I liked this little snippet "The country's vehicle market expanded by almost 14% to just over 28m vehicles last year"

This article compliments by adding "Looking at it another way, China bought more cars last year than there are people in Australia, and a third of those were SUVs". Just lol. Incredible right?

Sales growth for battery electric and plug-in hybrid cars also dropped last month as Beijing requires all automakers to re-apply for their models to receive subsidies under a stricter regime following allegations of subsidy cheating.

"Factory owners can't sell cars they have now as they are not on the list, and are worried they won't get the subsidies either," said Xu Haidong, CAAM's assistant secretary general. "This has had an impact on new energy vehicles' sales and is the reason behind the big drop-off."

Overall if we check how our PGM metals are performing today in the wake of results they are down having retreated from recent highs along with other commodities like gold and silver. USD strength is behind this in my view. I would hazard a guess that Trump in the media abroad, behaving 'properly' (or as best as can be hoped) is a positive sign for USD strength going forward. It would therefore be wise to sell down precious metal related positions prior to these events. Trump has not stood by his America first rhetoric on a number of occasions during 'diplo-meets'.

Trump managed to avoid "repeating accusations that Japan was one of several countries devaluing their currencies to the disadvantage of the U.S." in the meeting with Abe.

"Abe and Trump also agreed to hold an economic dialogue after Trump withdrew the U.S. from the Trans-Pacific Partnership agreement. Market sentiment also received a boost after Trump agreed to honor the "one China" policy during a phone call with China's leader Xi Jinping late last week."

But I would think once the media frenzy cools and markets take stock, economic data will continue to lead the USD lower. US sentiment is also riding high following a ramptastic remark made last thursday, that certain posters across LSE would be proud of lol. He said he would be announcing something over the next two or three weeks that would be “phenomenal” in terms of tax, without providing any additional details.

Despite Dollar dominance over the Euro and Sterling which is a trend likely to continue, all three will likely remain inferior to rising precious metal prices expected to continue as this year progresses.

I hold LMI, SLP, FRES, RRS, CMCL, SHG and a couple of explorers.

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