Monetary data out of China released over the past week have bolstered investor sentiment. Chinese CPI (consumer price index) continued to fall in December 2011, coming in at a 15-month low of 4.1% y-o-y (compared with the 6.5% high registered in June), while producer price inflation was subdued at just 1.7%. Such disinflation raises hope that the People’s Bank of China will follow up its December 5 reserve requirements cut and ease policy to reinvigorate economic growth. Money supply and loan data for December suggested that monetary conditions are already easing, with both coming in stronger than expected – Chinese banks extended CNY640.5bn in new loans in December, a sharp rise from November’s CNY562.2bn amount. Hopes of Chinese easing have boosted copper prices, with a 7.6% year-to-date gain, while the Chilean peso (which is heavily influenced by copper prices) is enjoying a technical bounce.

Similarly, German equities are breaking higher, building on the recovery they have staged since early October. While we anticipate further near-term gains for such assets, we remain very sceptical about the health of the Chinese economy, and we believe a collapsing property market will ensure a ‘hard landing’ in 2012.

Agribusiness Themes For 2012

Earlier this week, BMI’s Commodities Team published its list of agribusiness themes for 2012. In brief, the five themes are:

1. Tightening ethanol supplies
2. Supply shocks due to the La Nina phenomenon
3. Outperformance by food manufacturers’ share prices
4. Risks to commodities trade finance
5. Chinese import fluctuations

We discuss these in greater detail in Business Monitor Online.

Tags: agribusiness, bank lending, China, food prices, inflation, La Nina, monetary policy
Posted in: Agribusiness, China, Commodities, Equities, Food And Drink, General, Inflation/Deflation, Latin America
RSSFree email updates