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Here is the opening for this topical report (PDF also provided) from Bloomberg:

China's economy expanded at the slowest pace in 10 quarters as Europe's debt crisis curbed export demand and the property market weakened, sustaining pressure on Premier Wen Jiabao to ease monetary policy.

Gross domestic product rose 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said in Beijing today. Growth exceeded the 8.7 percent median of 26 estimates in a Bloomberg survey, staying above the 8 percent that signals a "soft landing" for China, according to SinoPac Financial Holdings Co., which correctly predicted the GDP number.

Asian stocks rose on speculation policy makers will ease lending curbs and increase fiscal spending to bolster the world's second-biggest economy. Liang Wengen, China's richest man and chairman of Sany Heavy Industry Co., told Wen this month that construction-machinery demand is weak and called for more infrastructure investment.

"Decelerating GDP growth will provide more room for policy makers to shift towards a pro-growth bias after an extended tightening cycle," Jing Ulrich, chairman of global markets for China at JPMorgan Chase & Co., said in a note after the data. "At this juncture, the challenge for policy makers is to implement measures that boost domestic demand without setting back progress made in curbing inflation."

The Shanghai Composite Index (SHCOMP) climbed 4.2 percent today, the most since October 2009, on expectations for more monetary easing and on speculation the government will support equities. The MSCI Asia Pacific Index gained 2 percent at 5:14 p.m. in Tokyo.

My view - Despite its impressive GDP growth rate, China's Shanghai Composite Index (weekly & daily) has been an underperformer since July 2009. This is mainly due to three reasons:

1) Monetary tightening to rein in a property bubble; 2) the largest increase in the supply of equity for any country over the last two and a half years due to government sales of previously non-tradable shares in a number of industries, plus secondary offerings by banks and other financial companies to raise their reserve requirements; 3) investor caution due the Eurozone's sovereign debt crisis and slower global GDP growth.

Needless to say, what happens next for China will have significant implications for Asia, commodity prices and global GDP growth.

This chart-illustrated feature continues in the Subscriber's Area.

The Weekly View: Adding to Exposure to Emerging Markets - My thanks to Rod Smyth, Bill Ryder and Ken Liu of RiverFront for their excellent timing letter. It is posted in the Subscriber's Area but here is the opening:

We have increased our emerging market equity weighting to neutral from underweight. Emerging markets largely disappointed in 2011, down about 19% versus a positive 2% for the S&P 500, despite better economic and earnings growth than developed-world equities. We think the primary causes of last year's underperformance were (1) restrictive policy to rein in inflation (mostly food-related, but also from property speculation in the case of China) and (2) a general 'risk-off' attitude among investors worried about potential catastrophic consequences arising from a Lehman-like failure in Europe. These fears appear to be fading; thus, given emerging markets' attractive valuation and fundamental growth prospects, we no longer want to be tactically underweight our strategic benchmarks.

My view - This makes sense to me. There are plenty of attractively valued equities in the world's stock markets. However, for debt-burdened western economies, there is no easy solution to the problem of insufficient GDP growth. It is far easier to stimulate corporate spending and domestic consumption in so-called emerging economies where governments are in surplus and household savings rates are high.

Additional commentary by Eoin Treacy

You Thought 2011 Was Volatile? Wait Til You See 2012 - Thanks to Steve Czech for another in his series of reports which lucidly outline the challenges facing the US and European economies. The full report is posted in the Subscriber's Area but here is a section:

Current Situation - Five First-Quarter 2012 Flashpoints for Europe:

The euro-zone crisis subsided for much of December 2011, but it may return with a bang early in 2012. Here are five key risks investors should have on their radar in the first quarter.

First , Greece aims to conclude its "voluntary" bond swap in January 2012, chopping €100 billion ($130 billion) off its debt and over time reducing the debt-to-GDP ratio to 120% from more than 160%. However, it's not clear that enough investors will sign up, potentially throwing the swap and Greece's bailout into disarray. Even if they do, the fear remains the deal doesn't do enough. The International Monetary Fund may yet conclude Greece's debt is unsustainable and stop lending.

Second , European credit ratings are set to fall. Standard & Poor's downgrade 14 euro-zone countries, and Moody's also plans to revisit its sovereign ratings. While much of the focus has been on France's triple-A, a greater risk may face Italy, which may fall to the triple-B category. Not far from junk, that could knock some of the country's debt out of bond indexes and increase collateral margins charged on Italian bonds, further constraining investor demand.

Third , Europe's bailout mechanisms will be in focus. The European Financial Stability Facility has failed to boost its firepower through leverage and has seen investor demand wane, but will need to issue bonds to fund Portugal. In March 2012, euro-zone governments will discuss the €500 billion cap on the EFSF's successor, the European Stability Mechanism. There will be pressure from the likes of Italy to boost the size of the fund, potentially causing even more intergovernmental friction.

Fourth , Eastern Europe may yet stir fears about bank exposures and increased political tensions within the wider European Union. Hungary in particular is cause for concern.

The government, in the face of vocal opposition from the European Central Bank , the European Commission and the IMF , on 1.6.12 ratified a bill that reduces the independence of the National Bank of Hungary, giving government-appointed officials more sway in monetary-policy making. That poses a risk to Hungary's access to markets and complicates talks with the IMF .

Fifth, with euro-zone policy driven by consensus, there is always the chance of unexpected moves from hard-line countries such as Finland, which held up the agreement on bailout funds in 2011. The first quarter of 2012 will also see the political focus move to France and rhetoric gear up ahead of April's presidential elections.

Incumbent Nicolas Sarkozy has been trailing Socialist Party candidate Francois Hollande in the polls; a change of government could generate fears of further delay and renegotiation in dealing with Europe's problems.

Of course, investors will also have to absorb a constant flow of data from Europe's economies, bank earnings and government-bond auctions. With banks deleveraging and governments trying to reduce their debt burdens, there is the real risk of weaker countries facing serious economic contractionsspooking markets over their ability to tame deficits. The one thing investors can be guaranteed of is that the December lull won't last long into January (Source: The Wall Street Journal, 1.3.12).

My view - The above points are all potential issues that may encumber efforts to stabilise the Eurozone's debt markets this year. Brinksmanship between the Greek government and its creditors remains a concern and highlights the risk of an unruly default. However, all of these problems are to one extent or another known to investors. What has changed in the last month is the attitude towards the crisis at key institutions such as the ECB.

Just about everyone understands that there are no easy solutions to the sovereign debt crisis. Jilted creditors can block access to the international debt markets for a prolonged period following a default. Argentina is a relevant example. Greece may well face such an eventuality. Much will continue to depend on how amenable it is to the bailout troika's austerity demands. In the face of this much publicised threat it is important to appreciate that everything possible is being done to support the Eurozone's banks and various sovereigns.

This section continues in the Subscriber's Area.

Saudi Arabia targets $100 crude price - This article by Javier Blas and Guy Chazan for the Financial Times may be of interest to subscribers. The full article is posted in the Subscriber's Area but here is a section:

Saudi Arabia is aiming to keep oil prices at about $100 a barrel, a third above its previous public target, in a sign that Riyadh needs higher oil revenues to sustain a big rise in public spending .

Ali Naimi, the Saudi oil minister, on Monday for the first time said the world's largest oil producer aimed to keep oil prices at the triple-digit level.

Our wish and hope is we can stabilise this oil price and keep it at a level around $100 [a barrel], Mr Naimi told CNN . If we were able as producers and consumers to average $100 I think the world economy would be in better shape.

My view - Saudi Arabia's efforts to avoid revolt through increased social benefits and generous fuel subsidies may remove a short-term element of uncertainty. It does not nothing to allay medium to longer-term fears of upheaval. The country appears ill equipped to cater to the needs and demands of its large, young population who display a strong sense of entitlement without a corresponding work ethic. (Also see David's piece in Comment of the Day on January 6th).

This section continues in the Subscriber's Area.

Canada Bubble Seen as IMF Risk With Record Low Rates - This article by Doug Alexander and Sean B. Pasternak for Bloomberg may be of interest to subscribers. Here is a section:

The IMF agrees, saying Canadian authorities may need to take more measures to rein in household debt, which along with high house prices pose a risk to the nation's economy.

Adverse macroeconomic shocks, such as a faltering global environment and declining commodity prices, could result in significant job losses, tighter lending standards, and declines in house prices, triggering a protracted period of weak private consumption as households reduce their debt, IMF staff wrote in the annual assessment of the country's economy last month.

The commercial banks say the low rates are a reflection of falling bond yields, and will help consumers pay off debt faster. The 10-year yield touched 1.837 percent on Dec. 16, the lowest level in data compiled by Bloomberg going back to 1989 as Europe's crisis drives demand for Canada's AAA rated bonds. The premium to equivalent-maturity U.S. Treasuries is seven basis points, compared with 32 basis points on Sept. 5, the most in 2011.

Low rates are absolutely not an invitation for Canadians to overextend themselves, Farhaneh Haque, director of mortgage advice at Toronto-Dominion, said in an interview from Toronto.

If you look at the low rates, you could look at them for the interest savings that will help you get debt-free faster.

My view - On returning from a holiday to Vancouver last year I remarked how the property section was larger than the main paper and that the mandarin language edition was thick with adverts attempting to attract Chinese buyers. A boom town is always fun. Vancouver with its picturesque setting and world class restaurants certainly fits the bill. Property prices, however, are well beyond the reach of an increasing number of people. It remains to be seen what effect a property slowdown in China will have on markets such as Vancouver where mainland Chinese are often the marginal buyers at the upper end of the market. .

The Canadian financial sector rebounded from the financial crisis better than just about all other OECD countries. The S&P/TSX Financials Index has lost downward momentum in the region of the 2010 lows and has rallied to test the 200-day MA recently. A sustained move back above 1600 would help bolster the medium-term bullish outlook.

This section continues in the Subscriber's Area.


Speaking engagements in the USA - I have accepted an invitation to speak to the Los Angeles chapter of the MTA on April 11th. The venue has yet to be confirmed but will be in the Long Beach area. Non-members are welcome to attend. The topic will be "To Hoard or to Horde: risks and opportunities from participating with the crowd."

I still have some space available on my itinerary. If you would like me to speak to your local chapter or organisation in California or New York please contact your respective chairperson and ask them to contact me.

The Chart Seminar 2012 - Following a sell-out tour to Singapore and Australia last year, The Chart Seminar will be held in San Francisco, New York and London this year. Please be aware that the early booking rate for non- subscribers at the US seminars expires on January 31st.

We are currently taking bookings for our San Francisco and New York dates in April as well as London seminars in May and November. Anyone interested in securing a place at any of our events should contact Sarah Barnes at sbarnes@fullermoney.com.

The date and venues for my seminars so far in 2012 are:

San Francisco - April 16th &17th 2012 Nikko Hotel

New York - April 23rd & 24th 2012 at The Manhattan Club (above Rosie O'Grady's) at 800 7th Avenue

London - May 25th & 25th 2012 at the Radisson Edwardian Hampshire

London - November 22nd & 23rd 2012 at the Radisson Edwardian Hampshire

The full rate is £950 + VAT. (Please note US delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires on January 30th for the US seminars. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.