The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Tao Dong, chief regional economist at Credit Suisse in Hong Kong, notes that power shortages and transport disruption have been the biggest casualties of the snowstorm. Around 78% of ChinaÆs power is derived from coal-fired plants. Without trains to deliver coal freight, the National Power Grid says its latest coal inventory has fallen to just 16.58 million tonnes û an all-time low thatÆs just barely sufficient for seven days worth of production.
The snowstorm has also toppled 330 major power lines and 96 electricity transmission towers, worsening ChinaÆs persistent power shortage woes. Statistics from the National Development and Reform Commission show it is lacking some 10% or 70 gigawatts of generating capacity.
Credit SuisseÆs Tao estimates the snowstorm has cut industrial production growth by 2%.
Glenn Maguire, Asia chief economist at Societe Generale in Hong Kong, adds that South Asian economies that export goods to China are likely to see a spillover effect. ôA more tangible slowdown in exports will become apparent in the first half of 2008, but the second round effects of this will not fully manifest themselves until 2009,ö he says.
The current crisis has also heightened food-driven inflation in China, a phenomenon that Richard Berstein, Merrill LynchÆs chief investment strategist in New York, calls ôagflationö. It is estimated the storm may have wiped out 10% of national farm production in January alone, according to Credit SuisseÆs Tao.
ôWe continue to believe that agflation will remain a force on the inflation front for many years,ö says Merrill's Berstein. ôChinaÆs inflation rate may be heading to a 10-year high due in large part to agflation.ö
However, Credit SuisseÆs Tao expects food supply constraints to ease in the second half of the year.
Clifford Lam, managing director for Hong Kong strategy and regional property research at Credit Suisse, notes that Hong Kong is not going to be immune from a US slowdown or China tightening. ôEarnings are the key and growth is slowing down. The Hong Kong equity market is likely to be trapped in the year of rat,ö he says.
The mood is not all gloomy, however.
While the storm has certainly highlighted many potential risks for China this year, its total damage will be limited to 0.3% of gross domestic product (GDP). The World Bank has forecast that the total GDP for 2008 will still rise by 9.8% on the back of strong economic fundamentals.
Despite the snowstorm and its potential impact, Credit SuisseÆs Chan remains overweight on the China consumption story and is bullish on consumer discretionary, consumer staples, health care, internet and telecom services, and properties.
Richard Wong, an investment director for China equities at HSBC fund management arm Halbis, says he believes any stockmarket selling influenced by the snowstorm has been an irrational overreaction to the problems at hand.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
Insto roundup: Norway's Oil Fund praises China governance efforts; NPS commits $100m to taxi-hailing app
Norway's Oil Fund welcome Chinese proposals improving transparency and shareholder protection; HK's MPF assets surge 35% year on year; Korea's NPS commits $100m to TPG consortium to invest in taxi-hailing app; Poba commits W270bn to European property; Malaysia's EPF sees investment income rise 59% year-on-year in first quarter, and more.