After two days of disappointing macro data out of China, with trade numbers missing expectations on Tuesday following by another drop and miss in producer prices overnight, the “great decoupling” between China stocks and both the S&P500 as well as the rest of the world continued, and the Shanghai Composite dropped another 0.9% to 3,052 to the lowest level since mid-October. Gauges of industrial, utilities and materials shares fell the most on CSI 300 Index, while the ChiNext small-cap gauge droped 0.9%, while the divergence with offshore Chinese stocks continued: MSCI China +0.8%, set for highest close since July 2015. In short: it’s Chinese stocks against the rest of the world.
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Furthermore, it’s not just stocks as China’s bond sell-off continued amid deleveraging concerns, leading China to sell five-year government debt at the highest cost since 2014.
To be sure, there have been various explanations for this ongoing decoupling, many of which were noted here previously, and most have to do with either China’s shadow bank crackdown, the ongoing monetary tightening by the PBOC, the recent plunge in commodity prices leading to accelerating margin calls and asset liquidations, and in general concerns about China’s record debt load.
This post was published at Zero Hedge on May 10, 2017.
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