>>> 22 provinces in China lower GDP growth target for 2014; Beijing and Shanghai

22 provinces in China lower GDP growth target for 2014; Beijing and Shanghai both lower 2014 GDP target to 7.5%, v 2013 GDP of 7.7% - Chinese press
- 7 provinces kept 2014 GDP target v 2013 GDP 
- Only 2 provinces raise 2014 GDP target v 2013 GDP 
- Heilongjiang Province raises 2014 GDP target to 8.5% from 2013 GDP of 8.0% 
- Hainan Province raises 2014 GDP target to 10% from 2013 GDP of 9.9%

Barron's The Case for 4% Growth

The Case for 4% Growth

Demand for new homes -- and the outlook for economic growth -- are understated, say these economists. How to play the new boom.

Snow paralyzed the Eastern U.S. last week, but it won't put a chill on what could be the hottest economy since the late 1990s. That's the contrarian outlook of Applied Global Macro Research, an unusually rigorous and prescient group that expects 4% growth in economic output this year and next. The firm's three economists -- Jason Benderly of Vail, Colo., and Carsten Valgreen and Niels-Henrik Bjørn of Copenhagen -- cite the ongoing housing recovery for their bullish outlook, arguing that future demand for housing is understated.

The trio doesn't just advise clients on their research. They also put their money where their mouth is -- a unique sign of their commitment to their ideas. Current investments in their hedge fund include the Standard & Poor's 500 Consumer Discretionary and Homebuilders stock indexes, which they have bought using exchange-traded funds. They also have an interest-rate play based on the belief that the Federal Reserve will respond to the stronger-than-expected growth by hiking the rate on federal funds sooner than the bond market currently anticipates.

Recent economic data have prompted widespread concern over economic weakness, but AGMR's 4% outlook for real economic growth diverges from the broad consensus, as well as from the central bank's Federal Open Market Committee. According to the Feb. 10 release of Blue Chip Economic Indicators, the consensus of 50 forecasters puts 2014 and 2015 growth at 2.7% and 3%, respectively. The FOMC's February 2014 Monetary Policy Report to Congress, released last Tuesday, revealed that the committee expected growth to run 2.8% to 3.2% this year and 3% to 3.4% in 2015.

But if, as AGMR predicts, the economy grows at 4%, the unemployment rate will likely fall to 6% by the fourth quarter from the current 6.6%. That should be low enough to prompt the FOMC to boost the fed funds rate, now just 0% to 0.25%, later this year.

What do economists Benderly, Valgreen, and Bjørn claim to see that others do not? The key difference, from their standpoint, lies in their long-term analysis of the dynamics of the housing cycle, plus the important positive effects of a rising housing sector on consumer spending. Just as the bursting bubble in housing helped trigger the Great Recession, the prolonged sickness in this sector, which has persisted well past the recession's end, is now poised to give way to an acceleration in the recovery that has been under way for the past few years.

Pent-up demand for housing should therefore boost this sector's contribution to economic growth. The contribution will come directly, via the increase in residential investment, and indirectly, through channels that include the greater purchase of consumer items for the home and a general increase in consumer spending from rising housing wealth.

"We can't overstate the importance of housing," comments Applied Global President Jason Benderly. "The housing cycle is likely to boost economic growth for some time to come."

To these powerful ingredients, add a few others: the feedback effect on consumer spending from rising labor income; the diminished "fiscal drag" from higher taxes and spending cuts; and the likelihood that investment in equipment, another key component of gross domestic product, will heat up in response to strength in these other sectors.

WHAT LENDS PLAUSIBILITY to AGMR's dramatic housing and consumption narrative is that the same variables it uses to predict the rebound also would have predicted the 2006-10 bust.

The key variables include a statistical mouthful that is nonetheless freighted with significance: housing starts as a percentage of the existing housing stock, with both stock and starts measured in units of detached homes and separate apartments. That percentage reflects the rate of additions to the housing stock. But since this addition rate must over the long term be driven by the needs of the population, our analysts adjust the percentage share by subtracting from it the percentage increase in U.S. residents 20 years and older.

Through most of the 1990s and well into the early 2000s, the rate of additions to the housing stock outstripped the needs of the population, a clear sign of overbuilding leading to a likely bust. By 2007, however, the reverse trend kicked in, with the rate of additions running lower than the population increase, an extended period of underbuilding that still persists.

The chances that this underbuilding will soon lead to a rebound are enhanced by two other variables in AGMR's statistical model: the ratio of unsold new homes to the stock of single-family homes, and the homeowner vacancy rate. Leading up to the bust that began in 2006, both variables went through the roof -- forgive the pun -- and remained high through 2010. Both have since plummeted.

THE DECLINE in the homeowner vacancy rate has been slowed by special factors like the unprecedented number of foreclosed homes in this cycle. But at 2% in 2013, down from a high of 2.9% in 2008, the vacancy rate has gotten much closer to the level of the late 1990s, when it ran 1.6% to 1.8%.

In addition to their model, Benderly and his colleagues view the turnaround in home prices since early 2012 as a vital ingredient in a strong general recovery due to its positive effect on consumer spending. While AGMR analyzes all of the main measures of home prices, it prefers the median sales price of existing single-family homes because that series has the longest history of monthly data, starting in 1968.

Tracing this series since 1968, the economists have determined that the underlying trend is for house prices to rise by an annual average of 2%-2.5% above the rate of consumer inflation. By that measure, a price bubble of unprecedented size was clearly forming through 2006, when annual increases in home prices often ran 10% faster than increases in the "personal consumption deflator" -- far above the trend growth rate of 2% to 2.5%. The idea that inflation-adjusted house prices have followed an upward trend in the U.S. not only squares with economic logic but is buttressed by house-price data from the Census Bureau that go back to 1930.

The price collapse that began in 2007 lasted through early 2012. So low did prices go that the inflation-adjusted median price as of December 2013 is still about in line with where it was in late 2001. The result is that house prices can easily rise 5% to 10% faster than the rate of inflation through this year and the next, and still not catch up with the trend growth rate of 2% to 2.5%.

As for inflation, AGMR does expect the rate to rise, but not by much, given the inertia that normally characterizes price inflation.

A FINAL KEY VARIABLE in determining residential investment is the mortgage interest rate. A higher mortgage interest rate does slow the growth of residential investment, but not by as much as one might think. That is partly because residential investment does not just consist of the construction of single-family homes or of broker commissions and other transfer costs relating to home sales. It also includes the construction of apartment buildings and manufactured homes, plus the huge category of home improvements, which frequently include adding new rooms.

At 4.4% in January, the 30-year-mortgage interest rate has risen a little more than 100 basis points (one percentage point) since the low in late 2012. AGMR calculates that, for every 100 basis-point rise, growth in residential investment is slowed by 2% to 3%, but only temporarily. Since it projects that residential investment is likely to rise by 20% this year and next, even another 100 basis-point rise should not slow that advance by very much.

The boost to GDP growth from the rise in residential investment reflects the direct effect of housing. According to Benderly, however, indirect effects are at least as great, once you include all of the ways housing tends to boost consumer spending. There is the increased purchase of rugs, furniture, and appliances when people form new households or move to a larger apartment or detached house, or add rooms to their home. And there is the increase in consumer spending generally through the positive wealth effect from rising home prices.

Also, since residential construction is a labor-intensive activity, there is the boost to consumption from the increased number of construction jobs and the associated income that is created. There are now 2.2 million residential construction jobs nationwide, down from a peak of 3.4 million in April 2006. While that 3.4 million might not be attained, an additional half-million looks plausible. And finally, as the labor market tightens, there is the added boost from a pickup in hourly-wage growth, which by some measures is already under way.

Then add the diminished head winds from "fiscal drag"; the federal deficit as a share of GDP will continue to decline, but at a slower rate than the past three years. Also add the likely response to the increase in consumption of enhanced investment in equipment, software, and inventories to the increase, all of which could make substantial contributions to growth of GDP.

As for the impact of the polar vortexes that have repeatedly slammed the country this winter, Benderly concedes they've caused some loss in output, but says most of the loss will be made up in the spring thaw.

APPLIED GLOBAL MACRO RESEARCH, managed since 2008 by the Vail-based Mary Allyn, a former head of Merrill Lynch's private banking group, has been making specific trading recommendations that are subsequently implemented by its separately run hedge fund, with assets of $45 million. Barron's published an article on these activities when the firm was called Benderly Economics and had made 18 recommendations ("Stock Picks From -- Hold the Jokes -- Economists," Nov. 29, 2010). AGMR has since issued 18 more.

Including a predecessor fund launched in October 2009, the firm's SYFOGLOMAD fund -- the name is an acronym for Systematic Forecasting of Global Macro Developments -- returned 40% through December 2013, net of fees. By comparison, the average macro fund in the HFRI database is up less than 5% over the same period.

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Current recommendations that reflect Applied Global's expectation for higher consumer spending, a rebound in housing, and higher output generally, include the SPDR S&P Select Sector Homebuilders ETF (ticker: XHB), SPDR S&P Select Sector Bank (KBE), and SPDR S&P 500 Select Sector Consumer Discretionary (XLY). They also recommend going long lumber futures, although the fund does not currently hold that position. The reason: Given its other positions in the markets, it is now near the maximum of the risk-constraints limited by its protocols. But if that situation changes, the fund may well take a long position in lumber.

And based on their forecast that the FOMC will hike the short-term interest rate by the end of this year, Benderly, Valgreen, and Bjørn expect the two-year interest rate to rise in relation to the 10-year. They have therefore taken a "yield curve flattening" position by shorting futures on two-year Treasuries and simultaneously going long 10-year Treasury futures.

Pessimists should not be especially challenged by AGMR's optimistic outlook, since it would barely alter the "new normal" of recent economic growth. Two consecutive years of 4% growth pale beside the record of the 40 years from 1960 through 2000, when sustained periods of 5% and 6% growth were fairly common (see chart). Even the subpar expansion of 2001-07 saw growth of 4.3% in 2003.

More importantly, economic expansions are supposed to make up for much of the output lost to the recessions that preceded them. But in this case, if real GDP does grow at an annual rate of 4% through fourth-quarter 2015, the period that includes the Great Recession of 2007-09 and runs through 2015 will still look dismal.

Annual growth since fourth-quarter 2007 -- the last peak, just before the Great Recession -- will have run just 1.8% in the eight years from 2007 to 2015. By contrast, through the eight years following the onset of the last deep recession, of 1981-82, growth ran 3.6% a year, or twice as fast. Real catch-up with the Great Recession requires a few years of 5% to 6% growth, and not even the optimists at Applied Global Macro Research are anticipating that.

>>> Further heavy snow, strong winds expected to continue Monday following recor

Further heavy snow, strong winds expected to continue Monday following record snowfall over the weekend - Kyodo News
- The Japan Meteorological Agency warned of heavy snow and severe winter conditions to continue in northern, eastern Japan as low pressure system noves to the northeastern Pacific coast. 
- Over the weekend, the severe low pressure system caused widespread air/rail transportation disruption, power outages, 12 deaths and over 1,650 injuries. 
- Several cities experienced record snowfall. 
- Up to 246,000 households were without electricity on Saturday.

>>> ECB's Coeure (France): ECB remains "very vigilant" on downside risks to pric

ECB's Coeure (France): ECB remains "very vigilant" on downside risks to price stability - press
- Says: "We are closer to the area where inflation expectations could be altered and create downside risks to price stability... We remain firmly determined to maintain the high degree of monetary accommodation that is appropriate for the euro area economy, and will not hesitate to take further decisive action if required."

WSJ : Ghosn Says Renault Would Face Problems if Rival Was in Trouble

Ghosn Says Renault Would Face Problems if Rival Was in Trouble
Supply Chains of Renault, PSA Peugeot Often Overlap

PARIS— Renault SA RNO.FR +3.80% would face problems of its own if French rival car maker PSA Peugeot Citroën UG.FR +2.31% got into serious difficulty, chief executive Carlos Ghosn said Sunday, as the supply chains of both companies often overlap.

"We have absolutely no interest in our French competitor getting into serious difficulty, for the simple reason that we share lots of suppliers," said Mr. Ghosn in an interview with the RTL radio station.

If these suppliers were themselves to get into difficulty because PSA or another automobile manufacturer were in a situation of falling sales and production "we would also be in difficulty," he said.

Automotive groups that have often adopted just-in-time supply chain systems to trim the cost of inventories have in the past found themselves in situations where their production lines came to a halt when one or more suppliers were prevented from manufacturing parts. That was notably the case when Japanese parts suppliers were forced to halt production in the aftermath of the earthquake and tsunami in 2011.

That and other events have prompted car makers to draw contingency plans to allow them to find alternative sourcing to keep producing.

Cash-burning Peugeot's board meets on Feb. 18 to decide on a plan that foresees the entry of the French state and Chinese automotive group Dongfeng Motor Co. into its capital for the first time, via a 3 billion-euro capital increase. That will give them equal shareholdings in the car maker's capital alongside the Peugeot family, which currently controls the company.

Peugeot needs to shore up its balance sheet with Dongfeng's help to expand its industrial and commercial presence in China and southeast Asia.

Mr. Ghosn, who also heads Japanese auto maker Nissan Motor Co, said he doesn't see a risk to Renault from a deeper alliance between Peugeot and Donfeng, noting that when Nissan created a joint-venture with Dongfeng in 2003, the Chinese company already had a partnership with Honda, another Japanese auto maker, and that Dongfeng had been exemplary in keeping Nissan's interests separate from those of Honda.

Barron's : How HSBC Could Gain from Higher Interest Rates

How HSBC Could Gain from Higher Interest Rates

If the U.S. Fed tightens, the global bank would be the biggest beneficiary among the world's major banks.

With its roots in Asia, stock listings in London and Hong Kong, and a strong emerging market franchise, HSBC Holdings is both well diversified—and easily misunderstood. In Asia, it's seen as an old colonial bank and a powerhouse in trade finance and cash management. In London, it's viewed as a bank that makes most of its money from Asia and emerging markets but retains a lucrative British base. Amid the financial crisis, HSBC's shares took a hit because of its European holdings and its exposure—since jettisoned—to subprime U.S. consumer finance. More recently, the emerging market business has made it unpopular with investors. The stock is down 9.5% in the past 12 months.

In reality, HSBC's (ticker: 005.Hong Kong) diversity is a key source of strength, says Christopher Wheeler of Mediobanca in London, adding, "If things are not doing well in Asia, their business in the United Kingdom is doing well." HSBC gets roughly 30% of its earnings from Europe and North America, 57% from Asia, and the rest from emerging markets elsewhere in the world.

Because it's a large player in global trade finance, HSBC is leveraged to a worldwide economic rebound, says James Chappell, an analyst for Berenberg in London. The difference between HSBC and Standard Chartered (STAN.UK), HSBC's main Pan-Asia and emerging market rival, is risk appetite. "While Standard Chartered has been adding risks in an effort to grow faster, HSBC has spent the last six years derisking," says Chappell.

The bank's profitability would gain from any U.S. Federal Reserve move beyond tapering and toward tightening over the next year. "No large bank in the world benefits more from the rise in interest rates than HSBC—not JPMorgan Chase (JPM) or Wells Fargo (WFC) or Deutsche Bank (DBK.Germany), or large Chinese or Japanese banks," says Chirantan Barua, an analyst for Sanford C. Bernstein in London. "If your bet is that the Fed won't allow rates to rise for the next five years, maybe you should stay away. But if you think that U.S. growth will be stronger than expected, and the Fed will be forced to raise rates early next year, now is the time to buy HSBC," he says.

Owing to its low loan-to-deposit ratio in key markets like Hong Kong and the U.K., close to 25% of HSBC assets are in cash or short-term bonds yielding no more than 40 basis points (0.4%), says Barua. Higher rates would mean a higher yield on those deposits.

The irony is that Fed tapering has led to emerging market stresses that have undercut HSBC shares because of its perceived emerging market footprint. In fact, more than half of HSBC's capital is in developed markets; more than 90% of StanChart's capital is in emerging markets. "When [Fed Chair] Janet Yellen finally moves on rates, HSBC stock will do very, very well," says Barua.

As attractive as these facets are, investors shouldn't buy HSBC just for its 6% dividend yield, 10% return on equity, cheap 1.1 times book valuation, or its 10.5 times earnings multiple, says Barua. They should buy it "because when the Fed finally moves next, there will massive earnings expansion," says Barua.

Barclays' Rohith Chandra-Rajan sees HSBC profits growing 30% over the next two years, to $1.29 in 2015. He believes that HSBC stock has a 20% upside from last week's 82 Hong Kong dollars (US$10.57). He also expects HSBC to keep paying out more of its earnings, pushing the dividend yield to 7.1% in 2014. If there's another big selloff in emerging markets, investors should take advantage of others' misunderstanding and snap up more HSBC shares.

Barron's : Nestlé Trims L'Oréal Stake, Sweetens Prospects

Nestlé Trims L'Oréal Stake, Sweetens Prospects

After the sale, it still owns some 23%, or €27 billion, of the beauty and cosmetics giant's shares.
Nestlé is beginning to look appetizing, so investors should consider adding the Swiss consumer-goods giant's stock to their shopping carts.

The maker of Nescafé coffee, Kit Kat chocolate bars, and Dreyer's ice cream last week signaled that a share buyback is in the cards following the sale of part of its stake in French cosmetics company L'Oréal, and the deliverance of full-year earnings showing that profit margins are improving even though top-line growth was below expectations.

Investors were unimpressed: The stock (ticker: NESN.Switzerland) closed Friday at 65.95 Swiss francs (almost $74), down almost 2.5% on the week. Its American depositary receipts ( NSRGY ) were trading Friday afternoon at $74.11.

The weakness looks like a buying opportunity. Nestlé's shares can return as much as 20% over the next 12 months, boosted by divestitures. The stock, which trades at 17 times estimated 2015 earnings, can climb as high as 78 Swiss francs, according to some analysts, for an upside of about 18%. A generous dividend could bump up the potential payout to investors.

That may be hard to digest for some investors; consumer-goods stocks have been out of favor in the past year. Nestlé has edged up about 2.5% in the past 12 months, a period in which the Stoxx Europe 600 consumer-goods sector has been roughly flat. The Stoxx Europe 600 index, a broader measure of European equities, has climbed 15% in that time.

Vevey, Switzerland-based Nestlé is a lumbering behemoth, with a stable of some 2,000 global and local brands in segments that range from baby foods and bottled water to cereals and pet foods. It has 465 factories worldwide, a workforce approaching 340,000, and a market value in excess of $230 billion. Perhaps unsurprisingly, it isn't exactly nimble.

In recent years, Nestlé has looked to profit from innovation and premium products in its core areas of nutrition, health, and wellness. Cost savings contributed more than 1.5 billion Swiss francs to earnings last year, too. But divestitures could be the key to outsize returns for shareholders.

Nestlé's sale of 8% of its stake in L'Oréal (OR.France) will lead to a buyback that will increase the intrinsic value of the Swiss company's remaining shares. Nestlé received 6.5 billion euros ($8.90 billion) for its L'Oréal shares, €3.4 billion in cash. The cash alone is enough to purchase almost 2% of its outstanding shares. The L'Oréal move wasn't exactly a surprise, although it came a couple of months sooner than expected. "This is a positive thing," says Matthew Beesley, head of global equities at Henderson Global Investors in London. "It makes the business more focused."

There should be more to come. After completion of the transaction, Nestlé will still own a 23.3% stake in L'Oréal, worth more than €17 billion, which it plans to wind down further. The timing of future sales could be determined by Nestlé's need for cash to fund acquisitions and fuel growth, rather than a desire to reward investors.

In addition to reducing financial investments, management hasn't been afraid to dispose of mature brands. It sold sports nutrition brand PowerBar earlier this month and diet business Jenny Craig in November. It could offload one of its water brands; sales growth in the water division was a tepid 2% last year.

AS PART OF THE L'ORÉAL DEAL, Nestlé received the French cosmetic company's stake in Galderma, a 50/50 joint venture in dermatology pharmaceuticals that will form the basis for a skin health unit. It's an indication of Nestlé management's determination to concentrate its product portfolio on faster-growing businesses.

Nestlé's sales in 2013 increased 2.7% to 92.2 billion Swiss francs, hurt by the strength of the Swiss currency. On an organic basis, sales were up 4.6%, below a targeted range of 5% to 6%.

Nestlé's businesses in emerging markets performed well, producing organic sales growth of 9.3% and accounting for 44% of total sales. With investors worrying about growth in emerging markets, however, that could be perceived as an Achilles' heel for the company. However, Nestlé's geographic diversification and the strength of its brands can counter any weakness.

Sales in developed markets inched up 1%, but the company should be able to perform better in 2014 as the economic environment improves. The profit margin again edged ahead, up 20 basis points (0.2 percentage point), to 15.2%.

Nestlé earned an estimated 3.44 Swiss francs per share in 2013, which is expected to rise to 3.54 Swiss francs in 2014 and 3.80 Swiss francs in 2015. It proposed a 5% increase in dividend to 2.15 Swiss francs per share, which would produce a yield of about 3.3%. That certainly represents a steady performance, though the return of cash to shareholders via buybacks could well be the icing on Nestlé's cake.

>>> Barron's Summary: Positive on CVS, Nestle, HSBC, AAL, EPL, NPO

Barron's Summary: Positive on CVS, Nestle, HSBC, AAL, EPL, NPO

Cover Story: Applied Global Macro Research takes contrarian view in light of tough winter weather in the US; forecasting growth near 4% in what they feel may be the strongest economy since the latter part of 1990s. 

Features: Calls for caution in the MLP craze. Following a rush for energy firms to convert, the asset class' performance has waned recently. Investors may want to consider being firm selective. 
2) Positive on CVS decision to halt tobacco sales. Sees the move as potentially driving more profit than it will lose from ending the practice. 
3) Positive on AAL: Cites money managers who feel the stock is cheap despite its strong appreciation following the merger close. Expecting some struggles in the near term as expected, but the firm should come out ahead given the strong management team. 
4) Positive on NPO: Sees recent case win highlighting plaintiff misrepresentations in Asbestos litigation as providing a positive opportunity for the stock. 

Tech Trader: Comcast acquisition of TWC, which is likely to be approved despite a number of issues, broadly indicates an end to the notion that cable has been greatly devalued by so-called over-the-top video offerings from NFLX, AMZN, Aereo, and others; Justice Department will likely look closely at Comcasts role as a gatekeeper, and its ability to potentially tax companies who need its pipeline to reach users; Comcast executives say strength of content providers such as ESPN or the NFL Network will limit its leverage. 

Trader: The market is discounting soft economic numbers, says Joseph Amato of Neuberger Berman, but new data coming next week should clarify where the economy is going; Positive on LMCA: Battle for TWC has distracted the market from companys undervalued shares, which have been hurt by investor concern about what a CHTR deal for TWC might have required, but for now theres a cushion of safety for investors; Cautious on SJM: Though gross margins rose on lower commodity prices, company still faces challenges; with shares down, relative value to peers and the market has become attractive, especially for investors with a long-term value bent. 

Follow-Up: Positive on Comcast: Despite the growth of streaming companies such as NFLX, cable users arent cutting the cord; acquisition of TWC makes sense, since a larger entity will have more leverage in negotiating with programmers; Positive onOXY: Company will likely continue to shed assets as it refashions itself to boost shareholder returns, share price could jump 25% after spinoff of California businesses. 

International Trader: Positive on Nestle: Sees the stock as an attractive buy, especially following the divestiture of some of its stake in L'Oreal. - Positive on HSBC: Highlights the firms strong diversification worldwide positioning the company to benefit from a trend towards higher interest rates. 

Emerging Markets: Positive on the stock market in China. Highlights that the Hang Seng has suffered deeply since the end of last year, and that many China stocks could be very cheap and poised for appreciation. 

Commodities: Expecting the dry bulk sector and freight futures as a whole to rise due to the expected strong demand from China for raw materials. 

Small Caps: Expecting EPL to provide an opportunity given its recent underperformance and the expectations for it to increase production this year.

>>> BOE Gov Carney: BOE will only start raising rates once the economy is operat

BOE Gov Carney: BOE will only start raising rates once the economy is operating closer to full capacity - BBC interview-
Sees slack remaining in labor market. 
- Expects rate rises to be limited and gradual. 
- Business investment to be critical in recovery. 
- Recent economic strength has been driven by business investment; "What we haven't seen yet is business investment pick up". 
- Says: "The path of monetary policy, the path of interest rates is going to be calibrated very carefully to ensure that only when we see sustainable growth in jobs, in incomes and in spending, will we make adjustments."

>>> Foreigners Bought Half Of All London Homes Selling For Over £1 Million

Foreigners Bought Half Of All London Homes Selling For Over £1 Million

Actually, according to the first detailed estimate of international purchase activity in London by Knight Frank, the percentage of all central London homes that sold for more than 1 million pounds to foreigners in the 12 months through June 2013, was 49% to be exact. And as we showed yesterday when we put China's loan creation in the context of US and Japanese QE, keeping in mind theuse of proceeds of all this newly created inside money has to ultimately go somewhere - that somewhere in this case being London and other global luxury real estate, said percentage is only going to get higher. Especially when one adds Russian, the middle east and other various regions whose oligarchs are desperate to park their money in "safe" havens. Some other findings from the Knight Frank report: • Over the 12 months to June 2013, 49% of all £1m+ sales in prime central London went to foreign buyers by nationality... • ...however only 28% of buyers were non-resident in the UK • Over the two years to June 2013 51% of new-build purchases in the prime central London market were by UK residents... • ...across the remainder of inner London the portion was 80%... • ...and across outer London 93% of sales were to UK residents • Our estimate is that over the past two years 85% to 90% of all new-build purchases in Greater London have been to UK residents Just as notable - foreigners love new construction: in the two years to June 2013, 69% of prime central London new-build purchases were to foreign buyers by nationality. And here, a tangent: those two main instances of Emerging Market tremors that we have seen over the past year as a result of QE - well, let's just say that they better normalize soon, and funds resume flowing toward the EMs rather than out of them or else, the London (first) and soon after all other luxury residential markets get it...