In an important note for markets and traders who hang on every piece of Chinese economic data, Westpac’s well informed China watcher Phat Dragon has an ominous forecast for Chinese property prices.
Writing in his June housing update released over the weekend, Phat Dragon said:
Prices are under downward pressure across the board, with the negative impulse gaining further strength through June…
While a more accommodative policy stance will support the sector to a degree, with the aggregate demand-supply position closer to balance than in previous cycles, and the natural ‘buyer on dips’ in a falling market (high-net worth) presently positioned on the sell side, there is more price weakness to come.
Many traders believe that the Chinese housing market is the bubble that will burst and take Chinese economic growth with it and while European and US markets ignored the underlying weakness in the economy that was evident amid last week’s Q2 GDP release, others believe this is a dark cloud worth keeping an eye on.
It just means the HSBC Flash manufacturing PMI on Thursday this week is going to be a huge release.