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TO THE POINT: Chinese food prices, especially those of vegetables, have dropped for the eighth week in a row due to abundant supply in the summer season. The inflation expectation was diminished slightly. The house market was caught in a predicament, in which the high prices were maintained, but with a limited number of buyers. Morgan Stanley planned to sell its property in Shanghai for the first time in five years, indicating its short position in the mainland property market. China Unicom was also suffering a hard time, as its share prices in the New York, Hong Kong and the mainland stock markets plummeted after a major restructuring took place in the mainland telecom industry. China Merchants Bank was downgraded after it bought Hong Kong's Wing Lung Bank for overseas expansion.
By LIU YUNYUN |
Applauding Affordable Food
Food prices, a major trigger for this round of inflation, are expected to drop as the summer harvest approaches.
Public information on the Ministry of Commerce website showed agricultural product prices dropped 3.2 percent in May, compared with that of April. Prices had fallen two months in a row.
In the last week of May, vegetable prices dropped 8.2 percent from the previous week, and the trend is likely to continue thanks to abundant supply. However, the pork price rebounded 0.1 percent partly due to the Wenchuan earthquake, which killed 3.66 million pigs. Analysts believed the pork price would continue running at a high level towards the end of the year.
Economists had reached a consensus that the consumer price index (CPI) growth rate would slow down in May year on year, from above 8 percent to around 7.5 percent.
Contrary to food price decline, the prices of means of production were rising week by week, according to the Ministry of Commerce. In the last week of May, the market prices of means of production monitored by the Ministry grew 0.9 percent from the previous week. When the international commodity prices kept surging, analysts believed the producer price index (PPI), a barometer on the wholesale level, would stay high, thus pushing forward the consumer prices.
Though the central bank is unlikely to raise interest rates in the foreseeable future, inflation pressure still exists.
How Prosperous Is Property?
The direction of the mainland property market development is a widely disputed topic among citizens and real estate experts. Some argued house prices would fall sharply after the August Beijing Olympic Games, while others held the market would be as robust as ever.
Amid wrangling, an international investment bank is ready for action. Morgan Stanley was reported to sell one of its properties in Shanghai for 1.1 billion yuan ($157 million), according to the Shanghai-based Dongfang Daily.
The property Morgan Stanley planned to sell is called Jinlin Tiandi Service Apartment, which was the first property investment in Shanghai of the investment bank. It is also the first time Morgan Stanley considered selling a property project. In the past five years, the investment bank bought many properties in Shanghai, but suspended the buying effort this year.
Morgan Stanley's move came as a surprise to many, indicating the company's not-so-optimistic view of the real estate market in the mainland. In May, house prices in Shanghai dropped 10 percent from the previous month, according to Dongfang Daily.
Property developers are hit harder by the government's stringent monetary policy, which tightens money supply to the developers. To find a way out, real estate developers are looking for reverse merger in the stock markets to fund themselves other than getting loans from banks. Reverse merger refers to the acquisition of a public company by a private company, allowing the private company to bypass the usual lengthy and complex process of going public.
On May 29, Zhongnan Group injected its property assets worth 5.095 billion yuan ($728 million) into Shenzhen-listed Dalian Jinniu Co. Ltd. (SZ. 000961). So far this year, about 30 property developers were listed through reverse merger.
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