Why numbers tell the story

A quick weekly spin on some interesting data that might affect you, your business or your investments.

 Firstly the debate about whether the property boom is over is redundant. As soon as the banks started restricting lending to investors some months ago it was done and dusted.

Westpac’s move to raise owner-occupied housing loans is the follow through on all the banks’ requirements to maintain higher capital ratios.

However the supply/demand situation, which really triggered the price surge, in the first place remains in place and will for a few more years to come.

The latest data shows dwelling approvals falling by 3.2 per cent in the June quarter after an upwardly-revised 11.6 per cent increase in the March quarter. Housing approvals fell 2.9 per cent and apartments fell 4.9 per cent.

But in the real measurable world work started on a record 211,484 new dwellings over the year to June, up 16.9 per cent on the previous year. At present a record 183,935 homes are under construction.

The housing construction industry has gone some way to ameliorating the end of the resources boom just as the Reserve bank predicted.

Secondly the size and importance of China on the world economic stage can only be underlined by this week’s startling data that there are more billionaires in China than the United States.

There are now 596 US dollar billionaires in mainland China, according to latest rich list from respected Shanghai-based research firm Hurun. That number is up 242 and would hit 715 if Hong Kong, Taiwan and Macau were included.

On Huruns’ figures that compares with 537 billionaires in the United States.

By the way China’s richest man is real estate mogul Wang Jialin, a big investor in Australia real estate and owner of the Hoyts cinema chain. He’s worth a cool $US34.4 billion.

Thirdly, as dbdata has mentioned before, tourism is surging back in Australia with the lowering of the Australian dollar having a real impact of inbound tourism. Nowhere is this more event than the surge in Chinese tourism where not only are the numbers surging but so is their spending

According to the Financial Review the latest data shows Chinese tourists spent $7 billion in Australia in the year to June, a 32 per cent increase on the same time last year. On a quarterly basis the spending increase was a staggering 70 per cent, as a record 940,000 Chinese visitors arrived in Australia.

Amazing as it sounds ANZ’s chief economist Warren Hogan estimates Chinese tourists accounted for 7 per cent of all growth in the Australian economy in the year to June 30.

Fourthly, if you’re wondering what’s happening on the stock market join the club? The wild gyrations, which have seen prices retreat more than 12 per cent recently only to rebound sharply, don’t seen to have any relationship to economic data or global events though everyone seems to be waiting for something bad to happen in China.

But the reality is that the market is actually higher than when it was at the start of the year. Not much higher at 1 per cent but still that’s something.

The numbers tell an interesting story and I’m thankful to my old associate at the AFR, Phil Baker for the data.

Most investors pay a grudging respect to how to the forward price/earnings, multiple which is a basic way of valuing stocks. It’s a useful tool to tell investors whether stocks are cheap, fair or over-valued.

At the moment the Top 200 stocks are trading of a forward P/E of about 14.5 times which is in line with its long-term average but below earlier this year, when the P/E was closer to a more expensive 16 times.

What happened then was that buyers started chasing smaller low cap stocks in search of growth.

So the cheaper stocks started carrying a premium over their usually more sought-after so-called heavyweight stocks like the banks and the big mining companies. Interesting it is these big companies that have been leading the latest upswing in the belief that they are now undervalued on those forward P/E numbers. It’s the market being itself back into line with the fundamentals.

Please remember that just because a stock has fallen in price doesn’t mean it’s cheap, the market is never perfect but that price fall could mirror something wrong in the company or the industry sector. Always do your own research.

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