OMG! China raises gas, diesel and jet fuel prices!!!!!! OMG OMG OMG!!!!

Off the top of my head (tips of my fingers) here are some houses that I noticed discussing, in published research, just this sort of move over the last 2 weeks alone:

• Credit Suisse
• JP Morgan
• Citibank
• CLSA
• ...
  

So... OMG! OMG! OMG! OMG!

Maybe it's not the hyper-bullish paradigm change and rerating catalyst that they and others are saying it is... that they knew all along, and that nobody else out on the street was onto, and that... (zzzzz...)

Still looking to cover some of my higher beta shorts, but taking my time.


(The FT article on the news here.)
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Perfectly timed note yesterday from Lan Xue at Citi... not the earliest on this theme (I am pretty sure that Dong Tao was, a couple of weeks ago) but great timing anyway!

• "Chinese utility and energy prices are just too low — China has not revised electricity prices since 2Q06 and gasoline diesel prices since Oct 2007, although both coal and oil prices have risen sharply.
• At current levels, China’s utility and energy prices are at least 50% below international prices, which clearly are unsustainable in the long run.
• If meaningful adjustments are made to electricity and utility prices, sectors such as airlines, auto and manufacturing in particular would be hurt.
• But we think such a move would be positive for the overall market, as it would signal a more market-oriented policy approach from the government, rather than continued price intervention."

Equally perfect timing from Frank "Bang-A" Gong across the road at Mr Dimon's new shop, JP in a note also released yesterday, prior to the NDRC announcements:

• "We are upgrading China to overweight within our Asian and Emerging Markets portfolios; based on a resumption of Renminbi appreciation, declining headline inflation and a potential switch in policy focus from inflation to growth. As is the case for the balance of North Asia, China would also benefit from a decline in the oil price.
• A fall in Chinese headline inflation to below 6% provides the flexibility to raise controlled fuel and commodity prices; this would benefit IPPs and refiners.
• The property sector should benefit from a change in government rhetoric from inflation to growth concerns."

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Interestingly, Dong Tao of CS concludes his own comments from this morning with a warning that: "there will be a bigger risk for the government launching harsh austerity if inflation gets out of control." He notes, rather more bearishly than his peers, that:

• "(it) is our view, that the hike of fuel and power prices... may push inflation toward double digits. This is just one of several possible outcomes, but we do caution that it could trigger aggressive tightening similar to the austerity engineered by then vice premier Zhu Rongji.
  
• Zhu raised interest rates by almost 150 bps in one and a half year and virtually cut off all bank lending through administrative measure. RMB devalued by almost 40% in the beginning of 1995.
  
• We estimate less than 0.3 pp down in GDP for 2008 due to the fuel and electricity price hike, which is minor and manageable. However, this does increase the risk of greater inflationary pressure, as wage growth is already accelerating.

• Beijing has moved toward the right direction by adjusting the increasingly outdated energy prices, but more are needed and will probably be done, in our view. The current price structure between input and output have not only caused heavy losses to the fuel and power suppliers; some of them may even get into cash flow problems soon.
  
• Under tight price control, inflation was transformed into fuel shortages, which has started to affect the operation of the economy through power interruptions and paralysis of truck transportation.
  
• We believe that Beijing will eventually move towards a complete liberalization of fuel and power prices, but the pace of such a process would depend on inflation. This goal may take two to four years to achieve."