• Tag Archives China
  • Oil Bear Market Sends Global Stocks, Yields Sliding; Chinese MSCI Addition Fizzles

    In an eventful overnight session which saw a historic transition in Saudi Arabia, an unexpected Republican victory in the Georgia Special Election, China’s inclusion in the MSCI EM index and Travis Kalanick’s resignation, S&P futures continued to fall, alongside stock markets in Asia and Europe, while oil prices extended their drop despite a larger than expected draw reported by API on Tuesday. The USDJPY continued its recent slide, dropping just shy of 111, while GBPUSD tumbled as low as 1.2589, the lowest since May announced the UK election, only to reverse and recover all gains ahead of the Queen’s speech on Wednesday.
    Despite the much hyped inclusion of 222 mainland Chinese shares in the MSCI EM index starting May 2018, which will by only 0.73% to include Chinese A-shares, the Shanghai composite closed a modest 0.5% higher, as the initial euphoria fizzled following calculations that buying pressure from the MSCI shift would be muted. MSCI estimated the change, due around the middle of next year, would drive inflows of between $17 billion and $18 billion. China’s market cap is roughly $7 trillion.
    The index provider also set out a laundry list of liberalization requirements before it would consider further expansion. “We suspect that it will be a long time before this happens,” wrote analysts at Capital Economics in a note. While China’s weighting in the MSCI Emerging Markets Index may ultimately rise to 40 percent or so, this rise is likely to be slow,” they added. “The upshot is that any initial boost to equities is likely to be small.”

    This post was published at Zero Hedge on Jun 21, 2017.

  • Could Recent FANG Weakness Be Signaling the End of the Bull Run?

    As we survey the financial markets and global economic backdrop, it appears that a change in the wind could be slowly taking place. Across the tides of global capital markets, a chillier wind may be starting to blow, ushering in what could soon be some sweeping changes in the major trends for primary capital markets. In China, the air of debt deleveraging seems to be taking root, with tightness in the money markets, bond market collapses, bond market closures, and inverted yield curves. In addition, there are also widespread rumors surrounding the viability of an assortment of wealth management products that have embedded duration mismatch problems baked into the cake.
    Here at home in the USA, boom times remain in full swing with stock market averages busting out to new highs seemingly day-after-day. Yet, behind the bullish headlines, there seems to be developing a clear pattern of parabolic (terminal) excess within the technology space, a pattern familiar to those market watchers who recall 1999 and 2008.
    Sure enough, for the most part, today’s current valuation metrics for technology stocks are nothing close to the fantasy price-to-eyeball ratios that seemed to capture the imagination of so many when the first internet boom developed in the late 1990s and peaked in March 2000. Yet, today’s market harkens back to a blend of the pre-tech wreck mania vertical blow off patterns and the famous Nifty 50 market of the early 1970s.

    This post was published at FinancialSense on 06/21/2017.

  • China ‘Rescues’ Bond Market In Symbolic Move But Yield Curve Remains Inverted

    For the 10th day in a row, China’s bond yield curve remains inverted (the longest in history).

    With yields at 3-year highs, corporate bond issuance is evaporating, and has now emerged as the latest major, and most imminent, threat facing China’s financial sector and $10 trillion corporate debt market.
    However, it appears Chinese authorities have reached their max pain point.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Leading The Multipolar Revolution: How Russia And China Are Creating A New World Order

    The last thirty days have shown another kind of world that is engaging in cooperation, dialogue and diplomatic efforts to resolve important issues. The meeting of the members of the Belt and Road Initiative laid the foundations for a physical and electronic connectivity among Eurasian countries, making it the backbone of sustainable and renewable trade development based on mutual cooperation. A few weeks later, the Shanghai Cooperation Organization meeting in Astana outlined the necessary conditions for the success of the Chinese project, such as securing large areas of the Eurasian block and improving dialogue and trust among member states. The following AIIB (Asian Infrastructure Investment Bank) meeting in ROK will layout the economical necessities to finance and sustain the BRI projects.
    The Shanghai Cooperation Organization (SCO) and the Chinese Belt and Road Initiative (BRI) have many common features, and in many ways seem complementary. The SCO is an organization that focuses heavily on economic, political and security issues in the region, while the BRI is a collection of infrastructure projects that incorporates three-fifths of the globe and is driven by Beijing’s economic might. In this context, the Eurasian block continues to develop the following initiatives to support both the BRI and SCO mega-projects. The Collective Security Treaty Organization (CTSO) is a Moscow-based organization focusing mainly on the fight against terrorism, while the Asian Infrastructure Investment Bank (AIIB) is a Beijing-based investment bank that is responsible for generating important funding for Beijing’s long-term initiatives along its maritime routes (ports and canals) and overland routes (road, bridges, railways, pipelines, industries, airports). The synergies between these initiatives find yet another point of convergence in the Eurasian Economic Union (EEU). Together, the SCO, BRI, CTSO, AIIB, and EEU provide a compelling indication of the direction in which humanity is headed, which is to say towards integration, cooperation and peaceful development through diplomacy.
    On the other side we have the old world order made up of the IMF, the World Bank, the European Union, the UN, NATO, the WTO, with Washington being the ringmaster at the center of this vision of a world order. It is therefore not surprising that Washington should look askance at these Eurasian initiatives that threaten to deny its central and commanding role in the global order in favor of a greater say by Moscow, Beijing, New Delhi and even Tehran.

    This post was published at Zero Hedge on Jun 21, 2017.

  • Now China’s Curve

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Suddenly central banks are mesmerized by yield curves. One of the jokes around this place is that economists just don’t get the bond market. If it was only a joke. Alan Greenspan’s ‘conundrum’ more than a decade ago wasn’t the end of the matter but merely the beginning. After spending almost the entire time in between then and now on monetary ‘stimulus’ of the traditional variety, only now are authorities paying close attention. Last September the Bank of Japan initiated QQE with YCC (yield curve control). The ECB in December altered its QE parameters to allow for what looks suspiciously like a yield curve steepening bias. And the Fed in its last policy statement declared its upcoming intent to think about balance sheet runoff that, as my colleague Joe Calhoun likes to point out, is almost surely going to be favored in the same way.
    Central bankers spent years saying low interest rates were stimulus. They have yet to explicitly correct their interpretation, preferring the more subtle approach of instead altering their operations as noted above. As I wrote back in December.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ June 20, 2017.

  • Remember When Ford ‘Cancelled’ That Plant In Mexico? Well, They’ve Just Moved It To China

    Back in January, Trump took a very public victory lap when Ford decided to scrap plans to build a $1.6 billion manufacturing facility in Mexico and invest in its Michigan facilities instead (we discussed it here: Trump Takes Victory Lap After Ford Cancels $1.6 Billion Mexican Expansion Plan As “Vote Of Confidence” In President-Elect).
    "@DanScavino: Ford to scrap Mexico plant, invest in Michigan due to Trump policies"— Donald J. Trump (@realDonaldTrump) January 3, 2017

    This post was published at Zero Hedge on Jun 20, 2017.

  • Caterpillar Retail Sales Rise Most In 54 Months

    Caterpillar’s great depression ended three months ago, when in March following a record 51 consecutive months of annual declines, its global retail sales posted the first, if modest, monthly increase growing by 1% on the back of a surge in Chinese and other Asia/Pac sales. Since then the trend has accelerated, and in May the company reported that Asia Pac sales soared by 49%, the highest since April 2011, while maybe more notably, retail sales in the US rose by 2%, for the first time since May 2015.

    This post was published at Zero Hedge on Jun 20, 2017.

  • Dudley Double-Speak & China Cash Send Stocks To Record Highs As Global Economic Hope Crashes

    “This is madness… this is the new normal…”
    Let’s start with this… The data-independent central bank balance sheet and the farce of global equity market strength… Global economic data has not been this disappointing in 15 months – no wonder global stocks are at record highs…

    This post was published at Zero Hedge on Jun 19, 2017.


    GOLD: $1244.20 DOWN $9.80
    Silver: $16.48 DOWN 15 cent(s)
    Closing access prices:
    Gold $1244.20
    silver: $16.53
    Premium of Shanghai 2nd fix/NY:$8.22
    LONDON FIRST GOLD FIX: 5:30 am est $1251.10
    LONDON SECOND GOLD FIX 10 AM: $1255.40
    For comex gold:
    TOTAL NOTICES SO FAR: 2589 FOR 258,900 OZ (8.0528 TONNES)
    For silver:
    For silver:
    15,000 OZ/
    Total number of notices filed so far this month: 914 for 4,570,000 oz

    This post was published at Harvey Organ Blog on June 19, 2017.

  • Gold’s Pricing Power Moving East – Part 2

    China excluded from the global gold price or arbitrage includes it?
    China is unhappy that gold prices should be driven by U. S. and dollar concerns. But many state that because there is no free flow of gold in and out of China, China will remain a parochial market, not integrated into the global gold market. Nothing is now further from the truth.
    The author has worked with successful arbitrageurs in London in the past, so we can clearly see that through the London and Shanghai Gold Exchanges via bullion banks such as ICBC/Standard, HSBC and many others, arbitrage in gold is not just feasible but practiced.
    Any overweight London gold stocks can easily be sent to Shanghai from, in particular the ICBC/Standard branch in London that control two warehouses capable of holding 3,500 tonnes of physical gold. With this bank being a ‘market maker’ in London and a member of the LBMA price setting body, such a trading activity would be consistent with its normal functions.
    As to gold leaving China, it is not permitted, but the export of Yuan is. So a sale in Shanghai of gold receives Yuan which can be exported to buy gold in London. This is, in essence, giving arbitrageurs the ability to lower prices in Shanghai and raising them in London.
    Capital Controls in China do not pose a hurdle for this business. We believe that while capital exiting China is now heavily restricted, it is not withheld for the purchase and import of gold bullion.
    What this trade does do, is to smooth out price differentials between Shanghai and London. With Shanghai’s physical gold prices being more representative of physical gold demand and supply [due to volumes of gold traded] it is inevitable that Shanghai becomes the leading gold Benchmark pricer in the future.

    This post was published at GoldSeek

  • Inflation Trade: AMZN + WFM

    ‘Markets go up on an escalator, they come down on an elevator. This is the most hideously overvalued market in history.’
    David Stockman
    Last week’s action by the Fed was an effort to restore normalcy, but in the context of extraordinary action by the central bank. When you tell markets that the risk free rate is zero, it has profound implications for the cost of debt and equity, and resulting in different asset allocation decisions. Ending this regime also has profound implications for investors and markets.
    In the wake of the financial crisis, some investors found comfort in the fact that when risk free interest rates are at or near zero, the discounted future value of equity securities was theoretically infinite. Markets seem to have validated this view. But to us the real question is this: If a company or country has excessive and growing amounts of debt outstanding against existing assets, what is the value of the equity? The short answer is non-zero and declining. But hold that thought.
    Reading through Grant’s Interest Rate Observer over the weekend, we were struck by the item on China Evergrande Group (OTC:ERGNF), a real estate development company and industrial conglomerate that has reported negative free cash flow since 2006, but has made it up in volume so to speak. The stock is up over 200% this year, Grant’s reports. The real estate conglomerate has its hands into all manner of businesses and seems to typify the China construction craze.

    This post was published at Wall Street Examiner on June 19, 2017.

  • Gold and Silver Market Morning: June 19 2017 – Gold stabilizing around $1,250!

    Gold Today – New York closed at $1,256.50 Friday after closing at$1,254.60 Thursday. London opened at $1,250.20 today.
    Overall the dollar was slightly weaker against global currencies, early today. Before London’s opening:
    – The $: was slightly weaker at $1.1188 after Friday’s $1.1174: 1.
    – The Dollar index was slightly weaker at 97.24 after Friday’s97.34.
    – The Yen was stronger at 111.18 after Friday’s 111.31:$1.
    – The Yuan was almost unchanged at 6.8154 after yesterday’s6.8152: $1.
    – The Pound Sterling was stronger at $1.2780 after yesterday’s $1.2774: 1.
    Yuan Gold Fix
    New York closed at almost the same level as Shanghai did on Friday. This morning see Shanghai $3 higher, but London ahead of its open was trying to pull the price down a few dollars to $1,250, trying to guess the opening mood in London.
    Hong Kong’s central bank has stated that it prefers a stable exchange rate against the dollar. It is not independent of Shanghai and, judging by today’s exchange rate the People’s Bank of China agrees as we see the Yuan virtually unchanged today. This will allow us to see more clearly the differences between the Shanghai gold Exchange prices and London and New York.

    This post was published at GoldSeek on 19 June 2017.

  • China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis”

    Two weeks ago, a key China-linked concern that made headlines back in 2013 and 2014 reemerged after an extensive analysis by Reuters reporter Engen Tham found that China’s “ghost collateral” problem, or collateral that was either rehypothecated between two or more loans, or simply did not exist, had not only not gone away but was still as prevalent as ever if not worse.
    The report, a continuation of extensive reporting conducted on this site, said that 60% of all loans issued in China’s system are backed by property, and that China’s property values are ‘wildly misleading, which is part of the reason that China’s credit rating was recently downgraded.” Reuters reported that Chinese lenders are prone to fraud with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents.
    Now, in a follow up by the Vancouver Sun’s Sam Cooper, the real estate reporter explains that China’s “ghost collateral” problem has jumped across the Pacific and is threatening the Canadian banking system.
    As Cooper notes, “as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called ‘ghost collateral’, collateral that may not exist or is used continuously to secure loans for multiple borrowers.”
    And the stunner: “Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B. C.”

    This post was published at Zero Hedge on Jun 18, 2017.

  • Global Liquidity Reaching a Tipping Point

    ICYMI! Global #liquidity is close to its tipping point! pic.twitter.com/jqrOoaexHo
    — jeroen blokland (@jsblokland) June 16, 2017

    This week the Fed announced that they are going to begin reducing their $4.2 trillion balance sheet starting this year. Here’s what Louis-Vincent Gave at Gavekal Research said about this yesterday (see Louis-Vincent Gave on Tech, Fed Balance Sheet, and More):
    ‘In our system today, there are four central banks that matter a lot and have a disproportionate impact on global markets: the Fed, the Bank of Japan, the ECB, and People’s Bank of China. Starting from really six months ago, we’ve gone from zero central banks tightening to now two, because (in addition to the Fed) the Chinese central bank is also tightening.’
    Here’s an updated chart from Moody’s illustrating where central banks across the globe are currently, showing, as Louis says, US and China tightening while Japan and the ECB maintaining a loose policy stance (h/t @SoberLook):

    This post was published at FinancialSense on 06/16/2017.

  • The Next Minsky Moment

    ‘China’s economy has entered a state of new normal.’
    – Premier Li Keqiang, 2015
    ‘Success breeds a disregard of the possibility of failure.’
    – Hyman Minsky
    Welcome to the new, improved, faster-to-read, better yet still-free Thoughts from the Frontline. My team and I have been doing a lot of research on what my readers want. The reality is that my newsletter writing has experienced a sort of ‘mission creep’ over the years. Bluntly, the letter is just a lot longer today than it was five or ten years ago. And when I’m out talking to readers and friends, especially those who give me their honest opinions, many tell me it’s just too much. There are some of you who love the length and wish it were even longer, but you are not the majority. Not even close. We all have time constraints, and I wish to honor those. So I am going to cut my letter back to its former size, which was about 50% of the length of more recent letters. (Note: this paragraph is going to open the letter for the next month or so, since not everybody clicks on every letter. Sigh. Surveys showed us it’s not because you don’t love me but because of demands on your time. I want you to understand that I get it.) Now to your letter…

    This post was published at Mauldin Economics on JUNE 17, 2017.

  • The Treasonous Secession Of Climate Confederacy States

    After President Trump rejected the Paris Climate treaty, which had never been ratified by the Senate, the European Union announced that it would work with a climate confederacy of secessionist US states.
    Scotland and Norway’s environmental ministers have mentioned a focus on individual American states. And the secessionist governments of California, New York and Washington have announced that they will unilaterally and illegally enter into a foreign treaty rejected by the President of the United States.
    The Constitution is very clear about this. ‘No state shall enter into any treaty.’ Governor Cuomo of New York has been equally clear. ‘New York State is committed to meeting the standards set forth in the Paris Accord regardless of Washington’s irresponsible actions.’
    Cuomo’s statement conveniently comes in French, Chinese and Russian translations.

    This post was published at Zero Hedge on Jun 16, 2017.


    GOLD: $1254.00 UP $1.80
    Silver: $16.64 DOWN 5 cent(s)
    Closing access prices:
    Gold $1253.40
    silver: $16.67

    This post was published at Harvey Organ Blog on June 16, 2017.

  • Demand For Hong Kong Micro Apartments Surges As Buyers “Downgrade Expectations”

    The surge in Hong Kong housing costs has lifted home prices well beyond the bounds of affordability for most local families and young professionals, leading to long lines at housing sales that were sometimes oversubscribed by as much as 15x. But while home prices have risen for every type of home, Bloomberg notes that the intensifying demand for micro-apartments – some of which are as small as 128 square feet (about the size of a garden shed) – has caused prices for this segment of the housing market to climb more quickly than normal-sized homes. Why? Because they’re practically all Chinese buyers can afford.
    ‘The pool of buyers for small flats is getting bigger and bigger because people have to downgrade their expectations of the size of flats they can live in,’ said Nicole Wong, regional head of property research at CLSA Ltd. in Hong Kong. One 161 square foot micro apartment sold by property giant Henderson Land Development Co. was bought for just under $500,000. For that amount, buyers would be better off sleeping in their cars. Specifically, a Tesla Model X, which, as Bloomberg notes, is about 160 square feet, the same size of the above-mentioned apartment. Bizarrely, this is one instance where a Tesla Model X might be considered a bargain: They start at $150,000 in Hong Kong.

    This post was published at Zero Hedge on Jun 16, 2017.

  • Chinese Basis For Anti-Reflation?

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Yesterday was something of a data deluge. In the US, we had the predictable CPI dropping again, lackluster US Retail Sales, and then the FOMC’s embarrassing performance. Across the Pacific, the Chinese also reported Retail Sales as well as Industrial Production and growth of investments in Fixed Assets (FAI). When deciding which topics to cover yesterday, it was easy to leave off the Chinese portion simply because much of it didn’t change.
    In the case of IP and Retail Sales, that was literally the case. Growth rates for both were identical in May to what was presented for April. For the former, IP remains stuck at 6.5% after just one month (7.6% March) that suggested acceleration. Chinese retail sales were again 10.7%, which again almost perfectly matches the average for the last now 34 months.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ June 15, 2017.