The June money supply and credit stats out of China confirmed a couple of important trends that we’ve previously identified. The first is the gradual slowing in M2 growth, albeit the absolute pace is still fairly rapid. The second is the continued rapid expansion of credit to support economic growth. The third, and in my view one of the most important, is the slowing in M1 money supply growth.
The reason I feel it is an indicator worth closely monitoring is that it appears to have a 4-5 month lead on property price growth and the recent run of the data points to a slowdown in the housing market. Whether this turns out to be just a cooling off vs a downturn remains to be seen, but the direction is important as a lot of risks associated with China macro are dependent on and sensitive to the health or otherwise of China's property market. I talked about this in a video last week on the outlook for China's property market, investment, and commodities.
Joel Greenblatt Owned Hedge Fund On Why Value Investing Isn’t Working Now
Acacia Capital was up 12.27% for the second quarter, although it remains in the red for the year because of how difficult the first quarter was. The fund is down 14.25% for the first half of the year. Q2 2020 hedge fund letters, conferences and more Top five holdings Acacia's top five holdings accounted for Read More
The money keeps flowing in China, M2 growth is ticking along at the low end of the range, yet monthly new loans continue to expand at a rapid pace.
One of the "so-what" charts: Chinese M1 money supply growth appears to have about a 4-5 month lead on property price growth in China, thus it looks like a slowdown is on the way.
For institutional grade insights on the global economics and asset allocation, and some more good charts you may want to subscribe to the Weekly Macro Themes. Click through for a free trial.
Follow us on:
Article by Callum Thomas, Top Down Charts