• Tag Archives Hong Kong
  • Analyst Lays Out China’s “Doomsday” Scenario

    The first time we laid out the dire calculations about what is perhaps the biggest mystery inside China’s financial system, namely the total amount of its non-performing loans, by former Fitch analyst Charlene Chu we called it a “neutron bomb” scenario, because unlike virtually every other rosy forecast the most dire of which topped out at around 8%, Chu argued that the amount of bad debt in China was no less than a whopping 21% of total loans.
    Corporate investigator Violet Ho never put a lot of faith in the bad loan numbers reported by China’s banks: crisscrossing provinces from Shandong to Xinjiang, she’s seen too much – from the shell game of moving assets between affiliated companies to disguise the true state of their finances to cover-ups by bankers loath to admit that loans they made won’t be recovered. The amount of bad debt piling up in China is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. Bank of China Ltd. reported on Thursday its biggest quarterly bad-loan provisions since going public in 2006.
    Charlene Chu, who made her name at Fitch Ratings making bearish assessments of the risks from China’s credit explosion since 2008, is among those crunching the numbers. While corporate investigator Ho relies on her observations from hitting the road, Chu and her colleagues at Autonomous Research in Hong Kong take a top-down approach. They estimate how much money is being wasted after the nation began getting smaller and smaller economic returns on its credit from 2008. Their assessment is informed by data from economies such as Japan that have gone though similar debt explosions.

    This post was published at Zero Hedge on Aug 17, 2017.

  • Global Stocks Rise Amid Unexpected ECB “Trial Balloon”; Dollar Flat Ahead Of Fed Minutes

    European markets continued their risk-on mood in early trading for the third day, rising to the highest in over a week and rallying from the open led by mining stocks as industrial metals spike higher after zinc forwards hit highest level since 2007, lifting copper and nickel. The EUR sold off sharply, boosting local bond and risk prices after the previously discussed Reuters “trial balloon” report that Draghi’s speech at Jackson Hole would not announce the start of the ECB’s taper. The EURUSD has found support at yesterdays session low. Bunds have rallied in tandem before gilts drag core fixed income markets lower after U. K. wages data surprises to the upside. Early EUR/JPY push higher through 130.00 supports USD/JPY to come within range of 111.00.
    In Asia, Japan’s JGB curve was mildly steeper after the BOJ continued to reduce its purchases of 5-to-10-yr JGBs; the move was consistent with the BOJ’s desire to cut back whenever markets stabilize, according to Takenobu Nakashima, strategist at Nomura Securities Co. in Tokyo. The yen is little changed after rising just shy of 111 overnight. The S. Korean Kospi is back from holiday with gains; The PBOC weakened daily yuan fixing; injects a net 180 billion yuan with reverse repos; the Hang Seng index rose 0.9%, while the Shanghai Composite closed -0.2% lower. Dalian iron ore declines one percent. Japan’s Topix index closed little changed. South Korea’s Kospi index rose 0.6 percent, reopening after a holiday. The Hang Seng Index added 0.8 percent in Hong Kong, while the Shanghai Composite Index fell 0.2 percent. Australia’s S&P/ASX 200 Index advanced 0.5 percent. Singapore’s Straits Times Index was Asia’s worst performer on Wednesday, falling as much as 1.1 percent, as banks and interest-rate sensitive stocks dropped.
    The Stoxx Europe 600 Index rose 0.7%, the highest in a week. The MSCI All-Country World Index increased 0.3%. The U. K.’s FTSE 100 Index gained 0.6%. Germany’s DAX Index jumped 0.8% to the highest in more than a week. Futures on the S&P 500 Index climbed 0.2% to the highest in a week. Global markets are finally settling down after a tumultuous few days spurred by heightened tensions between the U. S. and North Korea. Miners and construction companies led the way as every sector of the Stoxx Europe 600 advanced as core bonds across the region declined. Crude gained for the first time in three days after industry data was said to show U. S. inventories tumbled 9.2 million barrels last week.

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

  • Hong Kong Gold Exchange Could Help Shift More Economic Power East

    London and New York dominate gold trading, but some analysts think Hong Kong may soon become a more significant player. Its success could solidify China’s place in the world gold market, strengthen the yuan, and shift more economic power from west to east.
    Last May, Hong Kong Exchanges and Clearing (HKEx) announced plans to launch gold futures contracts.
    This won’t be the first attempt to establish a gold exchange in Hong Kong. A government backed exchange launched in 2011, but the the Hong Kong Mercantile Exchange (HKMEx) folded after just two years.
    According to the South China Morning Post, the HKEx is in a much better positioned to succeed where its predecessor failed.
    HKEx will fare better. With quarterly revenues of HK$3 billion, it boasts enviable financial strength. As owner of the London Metal Exchange, it can command considerable expertise in commodity futures. And with the Hong Kong government as its largest shareholder since 2007, it enjoys powerful official backing.’

    This post was published at Schiffgold on Aug 14, 2017.

  • World Markets Slide Spooked By Latest N.Korea Statement; Dollar, Gold, Oil Jump

    European and Asian market and S&P futures have resumed their slide, as geopolitical tensions between North Korea and the U. S. spiked again overnight after Pyongyang responded to the latest set of warnings by Trump, revealing a plan to fire 4 ballistic missiles at Guam by mid-August. Gold gains for a third day while Brent rose above $53.
    Following de-escalation attempts by Rex Tillerson, and a NYT report that Trump’s “fire and fury” statement had been improvised, markets saw a tentative recovery in risk appetite in overnight U. S. and early Asian trading, but a risk off mood returned again as Asian stocks fell back and London, Frankfurt and Paris dropped 0.5-1.2 percent in Europe, spooked by North Korea’s latest response to Trump, which dismissed as a “load of nonsense” warnings by President Trump that it would face “fire and fury” if it threatened the United States and in which a general outlined a detailed plan on state TV to fire four Hwasong-12 ICBM at Guam by mid-August, sending virtually every Asian market lower. “Sound dialogue is not possible with such a guy bereft of reason and only absolute force can work on him” North Korea said of its diplomacy with Trump.
    Asia took the brunt of tonight’s selloff, with Japan’s Topix index ended less than 0.1 percent lower, while South Korea’s Kospi index slid 0.4 percent, adding to a 1.1 percent drop on Wednesday. The Hang Seng Index in Hong Kong fell 1.1 percent. Australia’s S&P/ASX 200 Index lost 0.1 percent. The MSCI Asia Pacific Index fell 0.5 percent. The won dropped to a four-week low and was trading 0.6 percent down, while the Japanese yen rose 0.2 percent to 109.80 per dollar, the strongest in eight weeks.

    This post was published at Zero Hedge on Aug 10, 2017.

  • Here’s The Most Alarming Sign Yet That Manhattan Real Estate Is Heading For A Crash

    The Chinese government’s latest crackdown on capital outflows and corporate leverage is intensifying, and that’s bad news for Manhattan’s property market.
    According to a report by Morgan Stanley cited by Bloomberg, new restrictions being imposed on the most acquisitive Chinese companies will likely lead to an 84% drop in Chinese overseas property investment this year, and a further 18 percent drop in 2018.
    The markets most vulnerable to this slowdown, according to MS, are the US, UK, Hong Kong and Australia, with commercial properties the most vulnerable.
    Manhattan commercial real-estate prices could fall sharply.
    ‘Manhattan is a particular worry, with about 30 percent of transactions in the borough that’s home to Wall Street involving Chinese parties in 2017. In Australia, China is the largest foreign real estate investor, accounting for as much as 25 percent of office property transactions in the last two to three years, according to Morgan Stanley.’ As we reported on Tuesday, the Chinese government is pushing Chinse insurance company Anbang – the company that was in talks with Jared Kushner to buy his company’s stake in 666 Fifth Ave. – to liquidate most of its overseas holdings and repatriate the proceeds of the sale. The company, whose chairman was detained by Chinese authorities in June, responded by saying it has no plans to comply…but we think the Communist Party will find a way to convince the company’s executives that deleveraging is in their best interest.

    This post was published at Zero Hedge on Aug 2, 2017.

  • SWOT Analysis: Popularity Rises for Initial Coin Offerings (ICOs)

    The best performing precious metal for the week was palladium, up 4.29 percent on hedge fund managers increasing their bullish positioning on the metal as expectations of increased usage in automotive catalyst to curb pollution. China’s purchase of bullion bars in the first half of the year rose 51 percent, reports Bloomberg, setting gold up for a sixth monthly gain in seven. China gold demand rose 545.23 tons, including gold bars to 158.40 tons. And as global gold prices retreat, China purchased more bullion from Hong Kong in June. The dollar dropped as gold rose this week following signals from the Federal Reserve that inflation remains below target, reports Bloomberg, fueling speculation that the central bank will not rush to raise rates. The Fed commented that the balance sheet unwind will start ‘relatively soon.’ The dollar held near the lowest in more than a year, with gold futures reaching the highest since mid-June. ‘Dollar weakness and U. S. political concerns are lending support to gold,’ said Guotai Junan Futures, a Chinese brokerage. The widening investigation into President Donald Trump, threatening to derail his economic agenda, has also spurred haven demand for the yellow metal, Bloomberg writes. Weaknesses
    The worst performing precious metal for the week was platinum, essentially flat by the end of the week. Part of the weakness related to weaker diesel engine demand. In addition, The U. K. became the latest European country to mark the end of the line for diesel and gasoline fueled cars, reports Bloomberg, as the government said it will ban sales of the vehicles by 2040. ‘The global shift toward electric vehicles will create upheaval across a number of sectors, from oil majors harmed by reduced gasoline demand to spark plug and fuel injection makers whose products aren’t needed by plug-in cars,’ the article reads.

    This post was published at GoldSeek on Monday, 31 July 2017.

  • The West lost at least another 1000 tonnes of large gold bars in 2015

    Over the last number of years, one of the most interesting trends in the physical gold world is the ongoing conversion of large 400 ounce gold bars into smaller high purity 1 kilogram gold bars to meet the insatiable demand of Asian gold markets such as China and India.
    This transformation of 400 ounce bars into 1 kilogram bars is an established fact and is irrefutable given the large amount of evidence which proves it is happening, as has been documented on the BullionStar website and elsewhere.
    It is also something which causes plenty of excitement in the gold world as it underscores the huge movement of physical gold from West to East, and the continual depletion of gold inventories from locations such as the London Gold Market.
    The general movement is one of 995 purity 400 ounce gold bars coming out of gold-backed ETFs, central bank gold holdings and other wholesale gold holdings, and these bars making their way to the Swiss refineries where they are transformed / smelted / recast into smaller 9999 high purity gold bars. The smaller gold bars are then exported from Switzerland to India, China, Hong Kong, and the Middle East.

    This post was published at Bullion Star on 31 Jul 2017.

  • June Swiss gold exports: 90% moving east — Lawrie Williams

    The latest figures for gold exports from Switzerland just further emphasise that physical gold is continuing to move eastwards in a big way. The country’s gold refineries sent 74% of their gold exports to Greater China (the Chinese mainland and Hong Kong) and India alone, while if we add in other south and east Asian nations – Malaysia, Singapore, Taiwan, Thailand and South Korea – and the Middle East – Turkey, the UAE, Lebanon and Jordan – fully 90% of Swiss gold exports that month moved to this region.
    Why is this so significant? Switzerland produces no gold of its own, but its gold refineries between them are the world’s largest gold exporters taking gold bullion and scrap from mines and other sources, including good delivery 400 ounce bars, and re-refining these into the smaller sizes in demand in Asia and the Middle East and re-exporting the bullion mostly to these eastern nations.
    The latest Swiss figures also support the anecdotal evidence of extremely tight supply, with the Swiss refineries struggling to source enough gold to meet the eastern demand. In June, Switzerland exported in total 162.1 tonnes of gold while only importing 124.9 tonnes – a shortfall of 37.2 tonnes. This is the second month in a row where Swiss gold exports were substantially larger than imports – the figure for May was around 39 tonnes.

    This post was published at Sharps Pixley

  • Bankers Ditch 7-Figure Salaries To Climb Aboard The ICO “Rocketship”

    In just a few short months, companies – many of dubious legitimacy – have raised more than a billion dollars through ICOs. Some of the better-hyped offerings in the field of 900 new coins that have been created this year managed to raise tens of millions of dollars in minutes. Investors, who were eager to throw money at the new coins, blindly hoping they would land on the next bitcoin or Ethereum.
    With all this money flying around, it’s no small wonder that bankers in New York, Hong Kong and London are abandoning seven-figure salaries to try their luck in the nascent ICO industry, according to Bloomberg. Stories like this have become commonplace with every passing fintech trend, as bankers, fearing the technology’s potential to disrupt the banking business and threaten their bonus pool, hoping to cash in on the next technology enabled ‘revolution.’

    This post was published at Zero Hedge on Jul 26, 2017.

  • CLOSE TO NEW GOLD STANDARD? Australia Exports Record Amount Of Gold To China

    Are the Chinese getting close to announcing a new gold-backed currency? Well, if the record amount of Australian gold exports into China is an indicator, it may be close at hand. While the Chinese have been importing a lot of gold from Australia, it reached a new record high in 2017.
    According to the recently released data by the Australian Government June 2017 Resources and Energy Quarterly, Australia exported more gold to Hong Kong and China during the first quarter of 2017 than any other quarter in history.

    This post was published at SRSrocco Report on JULY 19, 2017.

  • China’s Economy Charges On as Officials Target the Risk ‘Gray Rhino’

    China’s economy grew faster than expected in the second quarter, putting the nation on track to meet its growth target this year and giving backing to officials in their campaign to corral oncoming financial risk.
    Data showing that the world’s second-largest economy expanded 6.9 percent in the second quarter, matching the pace from the first three months, was released hours after the Communist Party’s People’s Daily newspaper warned of potential “gray rhinos” — highly probable, high-impact threats that people should see coming, but often don’t.
    In China’s case it’s the relentless buildup of risks caused by the debt-fueled investment that’s contributing to growth, a development tackled by a major meeting of top leaders in Beijing at the weekend. Until now, regulators have homed in on financial-sector excesses; that probe is now widening to debt in the broader economy, a shift that prompted a sell-off in domestic stocks.
    China is grappling with how to ensure annual growth of at least 6.5 percent this year while reining in financial sector risks ahead of a twice-a-decade leadership transition this fall at the 19th Communist Party Congress. A regulatory crackdown pushed up money market rates and helped damp down speculative lending while at the weekend President Xi Jinping warned regulators that failing to spot and dispose of risks in a timely manner would amount to a “dereliction of duty.”
    “The gray rhinos are containable,” said Liu Ligang, chief China economist for Citigroup Inc. in Hong Kong. But the economy is “still relying quite a lot on investment and credit and overall financial leverage is still building up. There’s no doubt that China’s debt overhang is still a serious challenge.”

    This post was published at bloomberg

  • The Future Of Artificial Intelligence: Why The Hype Has Outrun Reality

    Robots that serve dinner, self-driving cars and drone-taxis could be fun and hugely profitable. But don’t hold your breath. They are likely much further off than the hype suggests.
    A panel of experts at the recent 2017 Wharton Global Forum in Hong Kong outlined their views on the future for artificial intelligence (AI), robots, drones, other tech advances and how it all might affect employment in the future. The upshot was to deflate some of the hype, while noting the threats ahead posed to certain jobs.
    Their comments came in a panel session titled, ‘Engineering the Future of Business,’ with Wharton Dean Geoffrey Garrett moderating and speakers Pascale Fung, a professor of electronic and computer engineering at Hong Kong University of Science and Technology; Vijay Kumar, dean of engineering at the University of Pennsylvania, and Nicolas Aguzin, Asian-Pacific chairman and CEO for J. P. Morgan.

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

  • Doug Noland: Yellen on Inflation

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Global Markets rallied sharply this week. The DJIA rose 223 points to a record 21,638. The S&P500 gained 1.4% to a new all-time high. The Nasdaq100 (NDX) surged 3.2%, increasing 2017 gains to 20.0%. The Morgan Stanley High Tech Index rose 3.4% (up 24.6% y-t-d), and the Semiconductors surged 4.7% (up 21.8%).
    Emerging markets were notably strong. Equities rallied 5.0% in Brazil, 5.5% in Hong Kong, 5.1% in Turkey, 2.5% in Russia, 2.2% in Mexico and 2.1% in India. The Brazilian real gained 3.2%, the Mexican peso 3.0%, the South African rand 2.7% and the Turkish lira 2.3%. Global bond markets also rallied. Yields (local currency) dropped 27 bps in Brazil, 18 bps in South Africa, 16 bps in Turkey and 22 bps in Argentina. Here at home, five-year Treasury yields dropped eight bps (to 1.87%). U. S. corporate Credit also enjoyed solid gains. Across global markets, it appeared that short positions were under pressure.
    Markets reacted with elation to Janet Yellen’s Washington testimony – widely perceived as dovish. In particular, the chair’s timely comments on inflation were cheered throughout global securities markets. A headline from the Financial Times: ‘Fed Chair Yellen’s Inflation Concern Buoys Markets.’ And Friday afternoon from Bloomberg: ‘S&P 500 Hits Record as Inflation View Turns Iffy’.

    This post was published at Wall Street Examiner by Doug Noland ‘ July 15, 2017.

  • Fun on Friday: You Can Literally Wrap Yourself in Gold

    How would you like to wrap yourself in gold?
    I mean literally wrap yourself in gold.
    You can do it if you check into the Seven Stars Ottagono Presidential Suite at the TownHouse Galleria, a 5-star luxury hotel in Milan. The room features specially crafted 24-carat gold sheets.
    You’ll sleep like a baby wrapped in these golden sheets designed by Milanese jeweler Federico Buccellati. Unless of course you end up with insomnia worrying about how much money you just plunked for a hotel room.
    Piana Clerico fabricates the golden sheets. The artisan manufacturer was founded in Milan in 1582. The Hong Kong Tatler tells us more about how these luxurious sheets are made.
    The Piana family has a long-respected tradition for weaving gorgeous woolen textiles using precious materials and fibers, including gold yarn, cashmere, and silk. To make the sheets, Piana wove together its signature yarn, with a large content of 24-carat gold, accounting for 40% of the finished product. The shimmering sheets are a work of art – picture floral details and minute stitching, which glitters as natural light spills from the balcony into the bedroom.’

    This post was published at Schiffgold on JULY 14, 2017.

  • Gold futures debut in Hong Kong better than expected

    Two newly launched gold futures products in the Hong Kong market debuted to better than expected turnover on Monday, as gold traders credited physical delivery settlement and longer trading hours for the strong start.
    The two products, one traded in U.S. dollars, the other in yuan, mark the third attempt by the local stock exchange to step into gold trading.
    As of 7.30pm – 11 hours after their debut at 8.30 a.m. – 3,098 futures contracts had changed hands. Of these, 2,186 were priced in yuan and 912 in U.S. dollars. Each contract represents one kilogram of gold. They will continue to trade until 1am Tuesday morning.
    ‘The first day’s turnover of the two gold futures was better than expected. The gold market is pretty quiet on Mondays but the fact the HKEX could still achieve such a higher turnover make for a strong debut,’ said Jasper Lo Cho-yan, the chief strategist at King International Financial.
    Short trading hours were blamed by many for the previous failures. The gold futures launched in 2008 only traded for eight hours a day, far below the Chicago Mercantile Exchange in the U.S. which trades 23 hours a day.
    Lessons appear to have been learned; the two new gold futures markets in Hong Kong will trade for 16 hours a day.

    This post was published at South China Morning Post

  • Global Stocks Rise Amid Strong Economic Data; Yen Drops To 2 Month Low As Oil Resumes Slide

    In a quiet overnight session, S&P 500 futures are fractionally in the green (2,426, +0.2%) with European and Asian stocks as oil drops second day after an initial ramp higher amid speculation that LIbya and Nigeria may be asked to cap their production. Nasdaq 100 Index are again higher, following the biggest daily advance in more than a week, up 0.4% as of 6:20 a.m. in New York.
    With Friday’s jobs data seen as largely favorable, and the lack of wage growth expected to keep the Fed subdued, focus is turning to Janet Yellen’s semi-annual testimony on monetary policy and a meeting of Canada’s central bank on Wednesday for the latest policy signals from the world’s major central banks. Over the past two weeks, markets have reassessed the outlook for tighter monetary policies from major central banks following a string of hawkish remarks. “We’ll see just how much substance there is to these comments on Wednesday, when the Bank of Canada announces its latest decision, with investors now expecting a 25 basis point increase,” said Craig Erlam, senior market analyst at OANDA. A rate rise from Canada’s central would be its first interest rate rise in nearly seven years
    Global macro markets have traded with a cautiously positive tone as weekend’s G-20 meeting ended without market-moving surprises, while continued hawkish sentiment has pushed benchmark yields modestly higher. The yen slipped to fresh 2-month low against the dollar, trading at 114.22, after trade deficit data and BOJ Governor Haruhiko Kuroda reiterated that policy could be adjusted as needed. In Asia, stocks rose in Tokyo and Sydney, with the MSCI Asia Pacific Index rising 0.3% after hitting a five-week low Friday. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent while Japan’s Nikkei rose 0.8 percent to a one-week high helped by weakness in the Japanese currency; the Topix Index added 0.5% . Australia’s S&P/ASX 200 Index gained 0.4 percent. Hong Kong’s Hang Seng Index rose 0.7 percent, while shares on the mainland declined 0.2% after the PBOC drained net 30 billion yuan in liquidity after withholding open market operations for the 12th consecutive day even as the yuan strengthens for first time in six days. Dalian iron ore reverses early loss to gain for fourth day.

    This post was published at Zero Hedge on Jul 10, 2017.

  • Guess How Many Tesla Vehicles Were Registered In April In Hong Kong?

    And the hits just keep on coming for Elon Musk.
    After a tax incentive for electric cars was slashed in Hong Kong, new registrations of Teslas vehicles dropped from 2,939 to zero…
    Hong Kong, though relatively small, is a significant outpost of luxury car buyers and trend setters. Its government had long waived its vehicle registration tax for newly purchased electric automobiles, adding to the attractiveness of Tesla’s cars.
    Citing increased congestion of privately owned vehicles on its streets, the government said in February that it would be changing the policy so the tax would be waived only on the first 97,500 Hong Kong dollars (about US$12,500) of an electric car’s purchase price for individuals.
    After the change came into effect on April 1, the cost of a basic Tesla Model S in Hong Kong effectively rose to around US$130,000 from less than US$75,000.

    This post was published at Zero Hedge on Jul 9, 2017.

  • SWOT Analysis: Gold Has Outperformed the Stock Market Since 2000

    The best performing precious metal for the week was silver, with a fall of just 0.51 percent with platinum just behind that. Following wild price swings on heavy volume Monday and Tuesday in a suspected erroneous trade, gold traders and analysts remained bullish for a second week, reports Bloomberg. On Monday, 1.8 million ounces of the yellow metal were sold in a single minute and on Tuesday prices spiked in early European trading with about 815,000 ounces of gold bought in five minutes – a suspected reverse on the Monday fat finger trade. The euro has climbed to a 13-month high on speculation that Mario Draghi’s ECB is poised to reduce unprecedented monetary stimulus, writes Bloomberg News. This has allowed Europeans to pay the least this year to buy gold, the article continues, while comments from Fed Chair Janet Yellen this week did little to support the U. S. currency. HKEK and the Chinese Gold & Silver Exchange Society signed MoU on Thursday to consider cooperation on matters such as product promotion and storage vaults, according to a statement on the Hong Kong Exchanges & Clearing website. MoU signifies strategic partnership that aims to build a major gold and commodities trading center in Asia Pacific, said CGSE President Haywood Cheung in a statement, reports Bloomberg.

    This post was published at GoldSeek on 3 July 2017.

  • S&P Futures, Euro Shares Start 2nd Half Solidly In The Green; Oil Rises For 8th Day

    S&P500 futures have started the second half solidly in the green, up 0.3% to 2,429, tracking European markets broadly in the green, while Asian stocks fell slightly and crude oil is little changed. With US markets set to close at 1pm today trading volumes in many markets remain light before Tuesday’s July 4th holiday and as investors await Friday’s report on the American jobs market. Traders will be looking at key upcoming economic data for validation of the hawkish shift from central banks that roiled markets last week.
    The Asian session opened with the Yen initially strengthens following Prime Minister Abe’s shocking election loss in the Tokyo Assembly elections, but later reversing gains to trade materially weaker at 112.95 last, on speculation Abe will be forced to inject more stimulus to salvage his standing amid a muted reaction to strongest Tankan survey since 2014. Australian 10-year yield rise four basis points; T-note yield two basis points firmer at 2.32%; shares in Tokyo and Sydney steady in narrow ranges. MSCI’s broadest index of Asia-Pacific shares outside Japan held steady, staying within a stone’s throw of a two-year peak hit last week. Japan’s Nikkei ticked up 0.1 percent, helped by the solid Tankan report.
    In China, the PBOC drained liquidity for ninth day, pulling a net 70 billion yuan; Hong Kong’s Hang Seng and the Shanghai Composite climbed 0.1 percent amid concerns the world’s second-biggest economy could be slowing down. In Hong Kong financial shares benefited from the launch on Monday of the “Bond Connect” scheme linking China’s $9 trillion bond market with overseas investors. Industrial metals rose across the board after the Chinese Caixin Mfg PMI rebounded back into expansion territory, rising to 50.4 in June from 49.6 in May, and beating estimates. Dalian iron ore 2.3% higher: the benchmark iron ore contract climbed on Friday for its best one-week gain since November and is up almost 22% from its $53.36 June 13 low, which by definition places it in a bull market. China’s bond connect program with Hong Kong will give offshore investors another way to access the mainland’s $10 trillion debt market.

    This post was published at Zero Hedge on Jul 3, 2017.

  • How The “Enigma Network” Led To A Historic Crash In One Hong Kong Market

    Yesterday morning we discussed the sudden crashes amid 17 small cap Hong Kong firms, which collectively lost over $6 billion in market cap, on what we dubbed was a marketwide margin call, as confidence in the entire sector vaporized instantly, sending the small cap Growth Enterprise Market (GEM) plunging by over 9%, with some stocks plunging over 90%. Quoted by Bloomberg, Francis Lun, the CEO of HK’s Geo Securities said ‘we’re seeing a domino effect; all the companies in the same network got cut. These shares are owned by the same group of people so they must be experiencing a liquidity crunch and they don’t have the money to support the share prices.”
    It turns out there was more to this story, at the heart of which is a report issued six weeks ago titled ‘The Enigma Network: 50 stocks not to own’ by David Webb, a former director of the Hong Kong stock exchange, whose argument is that companies which crashed were entwined in a complex web of cross-shareholdings that had pushed their valuations to unsustainable levels. As Reuters adds, “Webb’s report mapped out a complex web of cross-shareholdings between companies listed on both the main board and its sibling, the Growth Enterprise Market, which he said created a breeding ground for volatility.”

    This post was published at Zero Hedge on Jun 28, 2017.