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JING ULRICH, CHAIRMAN OF CHINA EQUITIES AND COMMODITIES AT JP MORGAN, TALKS TO BLOOMBERG'S ERIK SCHATZKER ABOUT THE STOCK MARKET.
JUNE 10, 2010
SPEAKERS: ERIK SCHATZKER, BLOOMBERG NEWS
JING ULRICH, CHAIRMAN OF CHINA EQUITIES AND COMMODITIES, JP MORGAN
06:15
ERIK SCHATZKER, BLOOMBERG NEWS: Overnight in China, economic data showed exports surged almost 50 percent last month and property prices rose at a near record pace. The economy appears to be on fire, yet Chinese stocks ended down on the day, and the Shanghai composite is off more than 22 percent this year.
With us to discuss the outlook for China is Jing Ulrich, JP Morgan's Chairman of China Equities and Commodities, named one of the 100 most powerful women in the world by "Forbes" magazine. Jing is at JP Morgan's China conference in Beijing today.
Jing, let me start by asking you this question. Are Chinese stocks behaving as if the global economy is headed for another recession?
JING ULRICH, CHAIRMAN OF CHINA EQUITIES AND COMMODITIES, JP MORGAN: Well the Chinese stocks are completely disconnected with the underlying economy. So what we are seeing today is that the economy has been growing on a very robust pace. However, Chinese stocks have been among the worst performing stocks in the world in the year to date.
Now today's data just proves the Chinese economy is actually growing at a healthy pace. Exports actually surprised on the upside, up some 48 percent. The trade surplus also expanded to some $19 billion.
Of course on a monthly basis, the trade data are always quite volatile. But going forward, I think we have several challenges. One is the troubles in Europe. That may affect Chinese exports going forward. And secondly is the slowdown in the Chinese housing sector.
As you know, since April this year, the Chinese government introduced a host of measures to tighten control on the real estate sector, which is now actually affecting transaction volumes and affecting prices as well in the real estate market. So therefore, the stock market is a bit jittery these days.
SCHATZKER: Okay, so, Jing, I take it by what you just said there that you're giving more credence to the potential slowdown from European exports and the housing situation than you are to concerns that still exist among some Chinese investors, that the central bank and other policymakers are going to tighten access to credit further.
ULRICH: Well credit has already been tightened since the very beginning of this year. Year to date, we're seeing loan growth slowing from last year's 33 percent to about 24 percent.
Now the new worries for the market are basically how rapidly will the real estate market slow down? We're seeing transaction volumes in the key ten cities in China falling by 50 percent in May compared to the month of April.
In terms of Europe, as you know, the European continent accounts for 22 percent of Chinese exports. So that's the single largest destination for Chinese exports.
So therefore, the combination of external pressures, the slowdown in Europe, and the internal slowdown in the property market may actually put continued damper on the Chinese stocks for the time being anyway.
SCHATZKER: Okay, Jing, we've only got about 30 seconds. You're effectively saying that these concerns aren't fully reflected in the price? That the Chinese stock market could continue to decline?
ULRICH: Well I think the downside at this point is relatively limited. Earnings are growing. P/EĀ ratio is low - about 15 times. And by and large, investors, both globally and in China, are already quite cautious.
So very few people at this point are overweight China. So the bad news that we mentioned earlier on is largely baked in. Some time in the fourth quarter this year, we'll shift again to see the stock market performing better.
SCHATZKER: Jing, thanks so much. Jing Ulrich, Chairman of Equities and Commodities at JP Morgan in China.
06:18
***END OF TRANSCRIPT***
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