• Tag Archives Yuan
  • Bond Market Bulls Embrace China Debt Downgrade

    It appears credit ratings agencies simply get no respect…
    Four months after Moody’s downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to “prove” just how “stable” China truly is through its nationalized capital markets, S&P followed suit this week when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina’s communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.
    ‘China’s prolonged period of strong credit growth has increased its economic and financial risks,’ S&P said.
    ‘Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”
    According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.
    The cut will ‘have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,’ said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. ‘It will affect corporate financing.’

    This post was published at Zero Hedge on Sep 23, 2017.


  • S&P Downgrades China To A+ From AA- Due To Soaring Debt Growth

    Four months after Moody’s downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to “prove” just how “stable” China truly is through its nationalized capital markets, moments ago S&P followed suit when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina’s communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.
    ‘China’s prolonged period of strong credit growth has increased its economic and financial risks,’ S&P said. ‘Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth. Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent.”
    According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.
    The cut will ‘have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,’ said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. ‘It will affect corporate financing.’
    ‘The market has already speculated S&P may cut soon after Moody’s downgraded,’ said Tommy Xie, an economist at OCBC Bank in Singapore. ‘This isn’t so surprising.’

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


  • Weekly Commentary: Monetary Disorder

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Global Credit, Bubble and market analysis is turning more interesting.
    China August Credit data were out Friday. Total (aggregate) Social Financing jumped to 1.48 TN yuan ($225bn), up from July’s 1.22 TN and above the 1.28 TN estimate. New Loans were reported at a much stronger-than-expected 1.09 TN (estimates 750bn yuan), up from July’s 825bn. New loans expanded 13.2% y-o-y. Through August, Total Social Financing is running 18% above 2016’s record pace. Total system Credit growth (‘social financing’ plus govt. borrowings) appears on track to surpass $4.0 TN. While ‘shadow banking’ has of late been restrained by tighter regulation, household (largely real estate) borrowings remain exceptionally strong.
    It was the weaker Chinese economic data that made the headlines this week. Retail sales (up 10.1% y-o-y), industrial production (up 6.0%) and fixed investment (up 7.8%) were all somewhat below estimates. At the same time – and I would argue more importantly – Chinese inflation is running hotter than forecast. Considering the scope of the ongoing Credit expansion, inflationary pressures should come as no surprise.
    September 10 – Bloomberg: ‘Inflationary pressure emanating from the factory to the world is proving more resilient than economists have anticipated. China’s producer-price inflation accelerated to 6.3% in August from a year earlier, exceeding all but one of 38 estimates… That data… followed 5.5% readings in the prior three months… The surprise strength gives support for global inflation spanning from metals to fuel and shows the effects of resilient domestic demand and reduced supplies of some commodities.’

    This post was published at Wall Street Examiner by Doug Noland ‘ September 16, 2017.


  • Harvey, Irma, Gold and Bad Options

    In the Previous Three Weeks:
    Gold rose over $1,330. Silver reached $18.00. The DOW almost reached another all-time high. Hurricane Harvey slammed into the Texas coast, flooded Houston, and caused massive damage. Hurricane Irma crashed into Florida and created flooding and huge damage, although a late move west reduced potential destruction. China is preparing a crude oil contract that will allow oil exporters to sell their crude on a Chinese exchange and be paid in yuan, which can be sold on a Chinese exchange for gold. This could be very important for the gold market. The Federal Reserve met and … yada yada yada. North Korea and President Trump exchanged pleasantries in their great distraction game. GOLD: Year 1913: Price of gold: $20.67 per oz. U. S. national debt $3 billion. Year 2017: Price of gold: $1,300 per oz. U. S. national debt $20 trillion. The national debt is over 6,000 times larger than in 1913, yet the gold price is just 62 times higher.

    This post was published at GoldStockBull on September 14th, 2017.


  • Market Talk- September 15th, 2017

    North Korea spooked markets yet again by launching a missile that reported flew over Japan, which came a day after North Korea claimed it would sink Japan. The events were short-livid however and after a brief flight to safety in gold, treasuries and the Yen markets quickly corrected back. The JPY traded into the low 110’s but by US trading had drifted into the 111’s. Gold did have a bid in Asian trading but by the late US session was testing $1320. The recovery had already taken place by the time Asia closed with the Nikkei closing in positive territory (+0.55%) with exporters and financials setting the pace. The Australian ASX closed down -0.8% led by industrials and miners. SENSEX and Hang Seng were both little changed but we saw a positive return for the core Shanghai index closing up +0.55% as the Yuan drifted again.

    This post was published at Armstrong Economics on Sep 15, 2017.


  • Suddenly, ‘De-Dollarization’ Is A Thing

    For what seems like decades, other countries have been tiptoeing away from their dependence on the US dollar. China, Russia, and India have cut deals in which they agree to accept each others’ currencies for bi-lateral trade while Europe, obviously, designed the euro to be a reserve asset and international medium of exchange.
    These were challenges to the dollar’s dominance, but they weren’t mortal threats.
    What’s happening lately, however, is a lot more serious. It even has an ominous-sounding name: de-dollarization. Here’s an excerpt from a much longer article by ‘strategic risk consultant’ F. William Engdahl:
    Gold, Oil and De-Dollarization? Russia and China’s Extensive Gold Reserves, China Yuan Oil Market
    (Global Research) – China, increasingly backed by Russia – the two great Eurasian nations – are taking decisive steps to create a very viable alternative to the tyranny of the US dollar over world trade and finance. Wall Street and Washington are not amused, but they are powerless to stop it. So long as Washington dirty tricks and Wall Street machinations were able to create a crisis such as they did in the Eurozone in 2010 through Greece, world trading surplus countries like China, Japan and then Russia, had no practical alternative but to buy more US Government debt – Treasury securities – with the bulk of their surplus trade dollars. Washington and Wall Street could print endless volumes of dollars backed by nothing more valuable than F-16s and Abrams tanks. China, Russia and other dollar bond holders in truth financed the US wars that were aimed at them, by buying US debt. Then they had few viable alternative options.

    This post was published at DollarCollapse on SEPTEMBER 15, 2017.


  • Former JPMorgan Quant On Evading Chinese Capital Controls Via Bitcoin

    Mainland Chinese buyers have become a dominant force in real estate markets across the world. The Chinese government crackdown on outflows earlier this year severely throttled that money.
    While this money has been throttled, it’s still appearing in certain markets, most notably the United States.
    We wanted to know how exactly this is still happens, so we connected with Dr. Joseph Wang – a Bitcoin and Chinese capital outflow expert.
    Hong Kong-based Dr. Joseph Wang is an OG of monitoring China’s capital flows and Bitcoin. He currently serves as Chief Science Officer at BitQuant, a fintech that specializes in technologies for the upcoming China yuan renminbi equities option market, as well as options and futures for digital currencies. He previously served as Vice President of Quantitative Research for JP Morgan, the sixth largest bank in the world – whose CEO is now an outspoken critic of the cryptocurrency. He’s got a ton of street cred, but even more important – he monitors China’s capital outflows to seek business opportunities.

    This post was published at Zero Hedge on Sep 14, 2017.


  • “It’s Not Worth Fighting” – Hedge Funds Are Dumping Their China Shorts

    Pretty soon, China bears will be as rare as the Giant Panda.
    At least that’s what Bloomberg suggested in a story about how Chinese markets have continued to defy proclamations that country’s economy would soon collapse in an avalanche of bad debt, exposing rampant corporate fraud. Or that a rash of outflows and the pressure of short sellers would force a massive yuan devaluation. Or that the exposure of rampant fraud and abuse in its corporate sector would tank local markets, which rely heavily on shady investment products.
    We’ve repeatedly noted when fund managers who once loudly touted their China-related positions either moderated, or changed their minds completely. Just last week, Corriente Advisors’ Mark Hart announced the end of a seven-year options position that would’ve seen a massive payoff if the yuan dropped 50%. As we noted, he’d spent $240 million rolling over the options.
    Before that, Kyle Bass, during an appearance on Adventures in Finance, said that while he was 100% certain his thesis will ultimately prove correct, calling the timing has obviously proven difficult.
    Bass, in his interview, cited shady retail investment products that have been used to backstop $40 trillion in debt with only $2 trillion in equity as a looming sign of a collapse. (We’ve also noted other questionable financing deals like the use of collateralized commodity transactions, which we discuss in greater detail in ‘Did China’s Bronze Swan Just Arrive? Copper Inventories Crash Most In History’).

    This post was published at Zero Hedge on Sep 12, 2017.


  • Gold-Backed, Yuan-Denominated Oil Futures Could Dethrone US Petrodollar

    A recent move by China could take a big step toward dethroning the US petrodollar.
    The Chinese have announced the launch of a gold-backed, yuan-denominated oil futures contract. The move potentially creates a way for oil exporters to circumvent US dollar denominated benchmarks by trading in yuan. The contracts will be priced in yuan, but convertible to gold. An article in the Nikki Asian Review explains the significance of the move.
    The contract could become the most important Asia-based crude oil benchmark, given that China is the world’s biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in US dollars. China’s move will allow exporters such as Russia and Iran to circumvent US sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.’
    The stability of gold is the key to China’s drive to dethrone the petrodollar

    This post was published at Schiffgold on SEPTEMBER 11, 2017.


  • Market Report: Have we lift-off?

    As can be seen in our headline chart, gold and silver powered ahead further this week, and appeared to be undergoing a rerating. Gold this morning in early European trade was trading at $1354, up from $1320.80 at last Friday’s close. Gold is now up 17.5% on the year so far. Silver this morning is trading at $18.16, up from $17.73 last Friday, and is up 14% on the year. Silver still has some catching up to do, and appears cheap relative to gold.
    Continuing weakness in the dollar, notably against the euro, is being reflected in higher prices for precious metals. At the same time, commodity prices are rising, led by demand from China. China is offsetting some of the higher dollar prices for raw materials by allowing the yuan to rise against the dollar, which is up 8% this year.

    This post was published at GoldMoney on September 08, 2017.


  • A Matter Of “Trust”: A Look Inside China’s Crackdown Of Its $3 Trillion Shadow Banking Industry

    As discussed here in mid-August, when China reported its latest credit data, for the first time in 9 months China’s trillion Shadow Banking Industry – defined as the sum of Trust Loans, Entrusted Loans and Undiscounted Bank Loans – contracted.
    ***
    These three key components combined resulted in a 64BN yuan drain in credit from China’s economy, the first negative print since October, seen by analysts as more evidence that Beijing’s campaign to contain shadow banking and quash risks to the financial system, is starting to bear fruit.
    ***
    And, as a follow up report from Reuters overnight details, the crackdown against unregulated shadow financing is accelerating, noting that as the flood of unregulated cash swirls through the Chinese economy, Beijing has been taking aim at the trust companies whose unrestrained lending practices are worrying regulators. The trusts, which as we have discussed previously are at the heart of a vast shadow banking industry, are being pressured to step up compliance and background checks, and are being pushed towards greater transparency.

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


  • Kyle Bass: “China’s Credit System Is Reaching A Boiling Point”

    Fresh on the heels of the biggest-ever two-week drop in onshore dollar-yuan, noted China bear Kyle Bass gave an interview where he addressed one of the most exasperating aspects of the short-selling business, and an issue that he is no doubt grappling with at this very moment: What to do when confidence in your investing thesis is undermined by uncooperative markets.
    It’s been about three years since Bass first announced a massive bet against the Chinese yuan, a position that he has been forced to justify to his increasingly nervous investors, as the Chinese currency’s more than 6% surge since May – and its nearly 8% climb against the dollar so far this year – has more than reversed the currency’s largest one-year decline since 1994.
    To be sure, he’s still willing to explain how ballooning assets in shady Chinese wealth management products, which have swollen to more than $40 trillion in aggregate, are destined to collapse in a cascade of bad debt, taking the country’s banking system down in the process.

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


  • Venezuela Is About To Ditch The Dollar In Major Blow To US: Here’s Why It Matters

    Authored by Darius Shahtahmasebi via TheAntiMedia.org,
    Venezuelan President Nicolas Maduro said Thursday that Venezuela will be looking to ‘free’ itself from the U. S. dollar next week, Reuters reports. According to the outlet, Maduro will look to use the weakest of two official foreign exchange regimes (essentially the way Venezuela will manage its currency in relation to other currencies and the foreign exchange market), along with a basket of currencies.
    According to Reuters, Maduro was referring to Venezuela’s current official exchange rate, known as DICOM, in which the dollar can be exchanged for 3,345 bolivars. At the strongest official rate, one dollar buys only 10 bolivars, which may be one of the reasons why Maduro wants to opt for some of the weaker exchange rates.
    ‘Venezuela is going to implement a new system of international payments and will create a basket of currencies to free us from the dollar,’ Maduro said in a multi-hour address to a new legislative ‘superbody.’ He reportedly did not provide details of this new proposal. Maduro hinted that the South American country would look to using the yuan instead, among other currencies. ‘If they pursue us with the dollar, we’ll use the Russian ruble, the yuan, yen, the Indian rupee, the euro,’ Maduro also said.

    This post was published at Zero Hedge on Sep 8, 2017.


  • Market Talk- September 8th, 2017

    Governments and central banks across the world are still concerned about the lack of inflation or significant growth and we saw evidence again in that today from the Japanese Q2 GDP release. Well below estimate of 4% this mornings release came in at 2.5%. Mario Draghi also commented on growth concerns in yesterdays ECB meeting and it is also being questioned in the Federal Reserve as well. It didn’t help the stock market which closed down -0.65% with financials and exporters leading the decline and this again encouraged the yen dash as we now watch the mid 107’s trade. 10yr JGB’s traded negative for most of the day. One bright spot was the Hang Seng but that was large cap’s reflecting the US holding yesterdays levels. Still worth keeping an eye on the Chinese yuan as yet another stronger set today (6.5032) making this a double digit gain in days. SENSEX closed small up today still helping its impressive 10.5% YTD gain.

    This post was published at Armstrong Economics on Sep 8, 2017.


  • Yuan Tumbles After Beijing Gives Speculators Green Light To Short The Currency

    And now, Trump finally has reason to be angry with China for intervening in its currency to manipulate it lower, not higher.
    * * *
    After the biggest weekly surge in the Yuan on record, the first sign that Beijing had had enough of the relentless surge in the currency was unveiled overnight, when according to a Reuters report quoting “policy insiders” China had “begun to worry about a rallying yuan as exporters come under strain” a sign the currency’s gains might lose steam after it hit a two-year against the dollar just weeks before Beijing is set to host a crucial Communist Party gathering in the autumn.
    For those who have not been following our daily morning update on the Yuan, here is how sharp the move has been in recent weeks, and how painful to countless Yuan shorts who have been left with massive margin losses.

    This post was published at Zero Hedge on Sep 8, 2017.


  • Crashing Dollar Sends European Stocks, US Futures Reeling; Yuan Has Best Week On Record

    European stocks dropped, Asian and EM market rose, and S&P were lower by 0.3% as investors assessed the latest overnight carnage in the USD which plunged to the lowest level since the start of 2015, sending the USDJPY tumbling to 107, the euro extending gains to just shy of $1.21 and a slowdown in China’s export growth which however did not prevent the Yuan from posting its best weekly gain on record.
    It was all about the seemingly huge currency moves overnight as the dollar plunged for the 7th day in a row, the biggest 7 day drop in 4 months, amid doubts about further Federal Reserve tightening, North Korea tensions and as Hurricane Irma threatens South Florida. The Yen rose to the strongest level against the dollar since Nov. amid nervousness about possible provocation from North Korea ahead of its foundation day on Saturday; yen surged past 108 per dollar as options barriers gave way, triggering a series of stop-losses. The Yuan rallied toward 6.45/USD in both onshore and offshore markets as traders speculate PBOC will tolerate a stronger currency after it rose past the psychological 6.50 mark Thursday. The Australian dollar surged to the highest in more than two years on the back of dollar weakness while the cherry on top was the 10Y TSY yield touching a YTD low of 2.014% before rebounding to ~2.035%.
    Meanwhile, natural disasters were aplenty, including the most powerful earthquake this century to shake Mexico, while Hurricane Irma is projected to hit Florida Sunday, and North Korea is widely expected to launch an ICBM on its September 9 holiday.
    As reported last night, the big overnight story was the dramatic plunge in the dollar in Asian trading….

    This post was published at Zero Hedge on Sep 8, 2017.


  • Gold Prices Probe Key $1356 Level

    Gold prices fell below $1350 per ounce Friday lunchtime in London, cutting the metal’s weekly Dollar gain to 1.7% and heading for a loss against other major currencies after touching a new 12-month high for US investors at what some chart analysts called a key level.
    The Euro rose back to its strongest Dollar value since January 2015, peaking just shy of $1.21, while the Chinese Yuan hit USD levels last seen in December that year.
    Listen to Jeff Christian on Metals, Lithium, and Electric Vehicles
    “After a phase of consolidation [after] a major trough late 2015,” says the latest technical analysis of Dollar gold prices from French investment and bullion market-making bank Societe Generale, “gold has recently accelerated the up move, as shown by the break above the descending trend in force since the all-time high in 2011.
    “More importantly, gold formed a massive multi-year bullish reversal pattern (Inverted Head and Shoulder pattern)…and just probed its confirmation level at $1356.”

    This post was published at FinancialSense on 09/08/2017.


  • Dollar Bloodbath Continues Across Asia, Gold Tops Election-Night Spike Highs

    Having plunged by the most in 6 months during the US day session, the dollar is continuing to get pounded across AsiaPac with Hong Kong Dollar and Yuan surging. Gold is extending gains, breaking above the spike highs from election night…
    The Dollar Index is in free fall…This is the 7th straight down day for the USD Index…
    ***
    There is not much support below here…

    This post was published at Zero Hedge on Sep 7, 2017.


  • China Capitulation: Corriente Advisors’ Mark Hart Ends 7-Year Bet On A “Massive Yuan Devaluation”

    China bears like Kyle Bass claimed victory last year after bets that the Chinese yuan would weaken paid off handsomely – particularly if they were supercharged by leverage. Hopefully, for their sake, yuan decided to lock in those gains early this year. Because since January, China’s currency has whipsawed higher, reversing most of its 2016 depreciation as the US dollar has endured a period of broad weakness, and Chinese policy makers have turned their attention to managing the currency’s valuation against a basket of currencies.
    But Mark Hart, who, like Bass is a Texas-based fund manager, and who built his bear case against China on the theory that the PBOC would opt for a series of one-off devaluations in the yuan, instead of allowing it to gradually depreciate, which would be tantamount to a policy error.
    ***
    Here’s more from a post on Hart’s outlook that we published last year:
    ‘Hart believes that the Chinese crawling devaluation is an error as it carries with its the latent threat of much more devaluation in the future, thus encouraging even more outflows, which in turn forces China to sell even more reserves, which destabilizes the economy even further, forcing even more devaluation and so on.
    Instead, a one-off devaluation would allow policy makers to ‘draw a line in the sand’ at a more appropriate level for the yuan, easing pressure on China’s foreign-exchange reserves and removing an incentive for capital outflows, according to Hart, who’s been betting against the currency since at least 2011. He adds that China should devalue before its $3.3 trillion hoard of reserves shrinks much further, he said, because the country can still convince markets it’s acting from a position of strength.’
    According to Hart, while a devaluation this year would be ‘jarring’ and may initially accelerate capital outflows, it would ultimately put China in a stronger position. He said the country could explain the move by saying it would put the yuan at a level more reflective of market forces and allow the currency to catch up with declines in international peers.

    This post was published at Zero Hedge on Sep 7, 2017.


  • Mutiny “For” The Bounty?

    China recently announced they will trade oil for yuan ‘backed’ by gold. The story has gotten some press (none of it mainstream mind you), and many have questions as to what it really means. While quite complicated as a whole, when you break this down into pieces I believe it is a quite simple and logical end to Bretton Woods.
    For a background, China has had an exchange open for about a year where gold can be purchased with yuan, though the volumes so far have been miniscule to this point. China has also been all over the world inking trade deals (in yuan) and investing in all sorts of resources from oil to gold to grains, they have made no secret about this. With the most recent example here. They have trade arrangements and treaties with Russia, Iran and many other non Western nations. They have also ‘courted’ many Western nations privately (remember their meeting with the King of Saudi Arabia?) and actually lured many with their ‘Silk Road’ plans via the AIIB which was huge news last year (but nearly forgotten by Americans at this point?). We also know China has been a huge importer of gold for the last 4-5 years and done so publicly via Shanghai receipts and deliveries.
    So what exactly does ‘oil for yuan’ mean? In my opinion, China is basically leading a ‘mutiny FOR the bounty’ (we’ll explain this shortly). The only things holding the dollar up from outright death for many years has been the oil trade (and other trade commerce) between nations and settled in dollars. Anyone wanting to buy oil had to first buy dollars in order to pay for the trade. Anyone getting out of step and suggesting they would accept currency other than dollars was dealt with swiftly and harshly (think Saddam and Mohamar). In other words, the U. S. military ‘enforced’ the deal Henry Kissinger made with the Middle East (lead by Saudi Arabia) where ALL oil was settled in dollars. International trade settlement alone supported the dollar after the Nixon administration defaulted on its promise to exchange one ounce of gold for $35.

    This post was published at JSMineSet on September 6th, 2017.