Muddy Waters Proved Right As Huishan Dairy Prepares For Liquidation

On March 2017, we discussed the sudden 90% drop in the share price of China’s largest dairy farm operator, the Hong Kong-listed China Huishan Dairy Holdings. The collapse occurred the day after its creditors convened an emergency meeting to discuss the company’s cash shortage and was three months after Muddy Waters’ Carson Block questioned its profitability and said the company was ‘worth close to zero.’ After the collapse in the share price we joked that ‘it suddenly almost is.’ Now we have confirmation that Block was correct, as Huishan is entering provisional liquidation, citing liabilities of $1.6 billion. From Bloomberg.
China Huishan Dairy Holdings Co., the Hong Kong-listed company targeted by short sellers including Muddy Waters Capital LLC, is preparing for provisional liquidation in a move that could protect its assets as it negotiates with creditors. The firm had told its Cayman legal advisers to make the preparations, it said in a Hong Kong stock exchange filing Thursday.
Huishan’s board earlier found that the net liabilities of its units in China ‘could have been’ 10.5 billion yuan ($1.58 billion) as of March 31, the company said. A provisional liquidation generally is used to safeguard a company’s assets before a court rules what action to take.

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

Despite Massive Liquidity Injection, Chinese Stocks, Commodities Head For Worst Week Of Year

The PBOC stepped up cash injections this week, suggesting authorities are trying to shore up financial markets as a selloff in bonds spreads to equities… but it is not working!
As Bloomberg reports, the central bank has already added a net 510 billion yuan ($77 billion) via open-market operations into the financial system this week, matching the third biggest weekly injection this year.

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

Mueller Subpoena Spooks Dollar, Sends European Stocks, US Futures Lower

Yesterday’s torrid, broad-based rally looked set to continue overnight until early in the Japanese session, when the USD tumbled and dragged down with it the USDJPY, Nikkei, and US futures following a WSJ report that Robert Mueller had issued a subpoena to more than a dozen top Trump administration officials in mid October.
And as traders sit at their desks on Friday, U. S. index futures point to a lower open as European stocks fall, struggling to follow Asian equities higher as the euro strengthened at the end of a tumultuous week. Chinese stocks dropped while Indian shares and the rupee gain on Moody’s upgrade. The MSCI world equity index was up 0.1% on the day, but was heading for a 0.1% fall on the week. The dollar declined against most major peers, while Treasury yields dropped and oil rose.
Europe’s Stoxx 600 Index fluctuated before turning lower as much as 0.3% in brisk volumes, dropping towards the 200-DMA, although about 1% above Wednesday’s intraday low; weakness was observed in retail, mining, utilities sectors. In the past two weeks, the basic resources sector index is down 6%, oil & gas down 5.8%, autos down 4.9%, retail down 3.4%; while real estate is the only sector in green, up 0.1%. The Stoxx 600 is on track to record a weekly loss of 1.3%, adding to last week’s sell-off amid sharp rebound in euro, global equity pullback. The Euro climbed for the first time in three days after ECB President Mario Draghi said he was optimistic for wage growth in the region, although stressed the need for patience, speaking in Frankfurt. European bonds were mixed. The pound pared some of its earlier gains after comments from Brexit Secretary David Davis signaling a continued stand-off in negotiations with the European Union.
In Asia, the Nikkei 225 took its time to catch up to the WSJ report that US Special Counsel Mueller has issued a Subpoena for Russia-related documents from Trump campaign officials, although reports pointing to North Korea conducting ‘aggressive’ work on the construction of a ballistic missile submarine helped the selloff. The Japanese blue-chip index rose as much as 1.8% in early dealing, but the broad-based dollar retreat led to the index unwinding the bulk of its gains; the index finished the session up 0.2% as the yen jumped to the strongest in four-weeks. Australia’s ASX 200 added 0.2% with IT, healthcare and telecoms leading the way, as utilities lagged. Mainland Chinese stocks fell, with the Shanghai Comp down circa 0.5% as the PBoC’s reversel in liquidity injections (overnight net drain of 10bn yuan) did little to boost risk appetite, as Kweichou Moutai (viewed as a bellwether among Chinese blue chips) fell sharply. This left the index facing its biggest weekly loss in 3 months, while the Hang Seng rallied with IT leading the way higher. Indian stocks and the currency advanced after Moody’s Investors Service raised the nation’s credit rating.

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

China’s Credit Growth Is Freezing Up At The Worst Possible Time

Submitted by Gordon Johnson of Axiom Capital
CREDIT LEADS ‘ALL OTHER’ ECONOMIC DATA IN CHINA
China until recently euphoric credit growth, is rapidly grinding to a halt. As we published last week, and a key underpinning of our negative outlook on commodity prices through the remainder of 4Q17 and into 2018, the moderation in China’s credit seen more recently appears to be gaining momentum. The evidence?
Well, we note that: (1) new yuan loans in October came in at CNY1.04tn (vs. expectations of CNY1.1tn, and CNY1.8tn in the prior month), with banks making up CNY663.2bn of this amount – which was below the Consensus estimate of CNY783bn for October, and down from CNY1.27tn the prior month (Exhibit 1), (2) shadow banking remains around one-third of total social financing (‘TSF’), showing little signs of providing the ‘lift’ to credit it has previously when bank debt issuance underperformed – Exhibit 2, (3) year-over-year growth of new yuan loans, on a three-month-rolling average, has slowed to just +7.5% in October (Exhibit 3), (3) Y/Y M2 growth in China hit a multi-decade low of +8.8% in October (Exhibit 4), (4) household loan growth (i.e., mortgages) continued its precipitous fall in October (Exhibit 5), (4) Y/Y corporate bond and government bond issuance continues to trend negative (Exhibit 6), all ultimately resonating in (5) broad credit growth that continues to moderate (Exhibit 7).
In short, we believe
China’s efforts to deleverage are, increasingly, bearing fruit. What this means, in our view, is that China’s economic indicators will continue to slow, weighing on bulk commodity prices, and ultimately industrials, metals, and mining stock prices.

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

China Open Gold Trade in Yuan as Proxy for the Yuan

China keeps moving gradually to open up their economy to international forces. The People’s Republic of China has expanded the trade in gold in yuan and thus the internationalization of the national currency is moving closer. Gold merchants from the industrial metropolis of Shenzhen have been trading their yuan gold at the Hong Kong Stock Exchange since last week. Previously, this was only possible for Hong Kong gold traders. While some immediately claim this is China attacking the dollar, they are completely ignorant of international capital necessities.

This post was published at Armstrong Economics on Nov 14, 2017.

Looking Beyond the Headlines: Demand for Physical Gold Is Healthy

If you’ve perused the mainstream headlines today, you’ve probably read that overall gold demand fell to an 8-year low last quarter. This was primarily due to a steep drop in inflows into gold ETFs compared to last year, and sagging jewelry demand in India after the implementation of a new tax scheme. But despite the gloomy-sounding headlines, investors are still buying physical gold.
Investment demand for physical gold grew in the third quarter by 17%, according to a report released by the World Gold Council.
Global gold bar and coin sales grew 17% year-on-year in Q3, totaling 222.3 tons. Chinese investment drove demand for physical gold. Bar and coin sales increased 57% to 64.3 tons in the Asian nation. This continues a year-long trend. So far in 2017, gold bar and coin demand in China is at the second-highest level on record.
Two themes have underpinned China’s market this year. First, from a macroeconomic perspective, fears over a potential depreciation of the yuan and the specter of rising inflation continued to hang over investors. Second, there are relatively few alternative investment opportunities. The Chinese government, for example, imposed restrictions on the real estate market earlier this year. Gold, as a globally traded asset and a natural hedge against currency weakness, has benefited.’

This post was published at Schiffgold on NOVEMBER 9, 2017.

Trump Receives Hero’s Welcome In Beijing As Chinese Roll Out The Red Carpet

Ever since President Donald Trump and Chinese leader Xi Jinping shared a slice of chocolate cake at Mar-a-Lago in April, many have speculated about the burgeoning ‘bromance’ between two of the world’s most powerful men.
Well, if anybody had any doubts about thelr ‘special relationship’, the opulent welcome that the Trump’s received upon landing in Beijing should put them to rest.
A red carpet, military band and flag-waving children met Trump and first lady Melania Trump when they arrived in Beijing. That greeting – which included far more pageantry than is typically bestowed on visiting foreign leaders – was followed by a tour of China’s Forbidden City accompanied by Xi and his wife, Peng Liyuan. Following that, they took in an opera performance. Trump also reportedly showed Xi video clips of his grandchildren singing in Chinese. Indeed, a video of Ivanka Trump’s daughter Arabella reciting a Chinese poem went viral on Chinese social media shortly after Trump’s election last year.
The Chinese have promised that Trump would receive what they call a ‘state visit plus’ – with the Trump’s being accorded courtesies that are rarely bestowed on foreign leaders.

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

Oil For Gold – Real Or Imagined?

By having control of the physical market for gold, China can threaten to use it to destabilize the dollar, without destabilizing the yuan. As such, it is potentially devastating, and used carelessly could trigger an economic collapse in Western capital markets, wreaking financial and economic havoc in America and other advanced nations. China will never be wholly independent from trade with these nations, and severe financial and economic damage to the advanced economies will rebound upon her to some extent. For this reason, she has so far held off using gold as an economic and financial weapon, while she continues to insulate herself from periodic crises in Western economies. – Alasdair Macleod (Oil For Gold)
In response to questions about when China would finally cast aside the dollar and run the price of gold up, I’ve always replied that China would be shooting itself in the foot if it tried to replace the dollar too quickly. Don’t forget, China holds about $1.2 trillion in the form of Treasuries. Note: this ratio does not include the market value of its gold holdings, the actual amount of which is unknown outside of a small circle of Chinese officials.
When the idea of a gold-backed yuan-denominated oil futures contract surfaced, it became en vogue for those unable to analyze their way out of a paper bag to issue commentary refuting the idea. For some, if an event has not already occurred, they are unable to ‘see’ it.

This post was published at Investment Research Dynamics on October 29, 2017.

China Aims to Dethrone the Dollar

Last month, the Nikkei Asain Review reported on a move by China that could take a first step toward dethroning the US dollar. The proposed launch of a gold-backed, yuan-denominated oil futures contract got a lot of attention in alt-media circles, but didn’t make much of a splash in the mainstream. But now the mainstream is sitting up and taking notice.
During an interview with Bloomberg TV Tuesday, Graticule Asset Management Asia CEO Adam Levinson said China rolling out a yuan-denominated oil contract within the next few months will be ‘a wake-up call’ for investors who haven’t paid attention to the plans.
The move potentially creates a way for oil exporters to circumvent US dollar-denominated benchmarks by trading in yuan. The contracts will reportedly be priced in yuan, but convertible to gold.
Levinson said besides serving as a hedging tool for Chinese companies, the yuan-backed oil contracts will aid a broader government agenda of increasing the use of the yuan in trade settlement.

This post was published at Schiffgold on OCTOBER 25, 2017.

SWOT Analysis: How Will Gold Move Into 2018?

Strengths
The best performing precious metal for the week was palladium, off 1.44 percent for the week. Citigroup favors palladium in the short term, in response to pollution control, but says substitution risks prevent the bank from taking a more bullish view long term as the price of palladium is now higher than the price of platinum. After the Indian government eased rules on gold purchases, the country’s demand for gold jewelry and branded coins appears to be better than the last quarter, according to P. R. Somasundaram, MD for India at the World Gold Council. The ensuing wedding season is the key for quarterly demand performance, Bloomberg reports, and with a good monsoon season, stable gold prices should encourage consumers. In the month of September, Swiss gold exports doubled month-over-month to 148.4 metric tons, reports Bloomberg. In August, exports were only 72 tons, according to the Swiss Federal Customs Administration. Specifically, Swiss exports to China rose 21 percent and to Hong Kong rose 92 percent. Weaknesses
The worst performing precious metal for the week was platinum, off 2.41 percent as palladium seems to be the more crowded trade. September makes 11 months straight of China officially reporting a zero increase in the level of its gold reserves, writes Lawrie Williams. The only time in recent years that the Asian nation has published any month-by-month gold reserve accumulations was in the 16 months ahead of the yuan being accepted as an integral part of the International Monetary Fund’s (IMF) Special Drawing Rights basket of currencies, Williams continues. ‘We don’t think it coincidence that such month-by-month reporting effectively ceased once the yuan became part of the SDR, thus paving its way for acceptance as a reserve currency,’ the article reads.

This post was published at GoldSeek on 23 October 2017.

What a Gold-Backed Yuan and Cryptocurrencies May Mean for the Dollar

Amoungst all the crypto news this, and crypto news that, was a tiny item appearing in the Nikkei Asian Review on September 1st. Reporting from Denpasar, Indonesia, Damon Evans wrote, ‘China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.’
Not bitcoin backed, not ethereum backed, g-o-l-d backed. How low tech of the Chinese. For the moment, oil is priced in dollars, whether it’s Brent or West Texas Intermediate.
Evans explained,
China’s move will allow exporters such as Russia and Iran to circumvent U. S. sanctions by trading in yuan. To further entice trade, China (the world’s largest oil importer) says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.
This will be China’s first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies.

This post was published at Ludwig von Mises Institute on October 20, 2017.

Yield Curve Inverts, Yuan Slides As China GDP Growth Slows

Despite all the talk of deleveraging, China did anything but according to its most recent data but the lagged impact of the tumbling credit impulse is starting to show up in the broader macro data. Despite the National Congress being under way (and recent credit spikes and positive PBOC hints) GDP growth limped lower to the expected +6.8% YoY, and fixed asset investment growth was the weakest in over 17 years…
Ahead of tonight’s data dump, China macro data had been disappointing notably, having tumbled for over a month to its weakest since August 2016…

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

Overheating China PPI Sends 10Y Yields To 30 Month Highs As Banks Inject Another Quarter Trillion Dollars In Loans

Despite a disappointing US CPI report on Friday, which saw core inflation miss once again despite an expected spike due to the “hurricane effect”, moments ago China reported that in September, its CPI printed at 1.6% Y/Y, in line with expectations, and down from, 1.8% in August largely due to high year-over-year base effects, but it was PPI to come in smoking hot, jumping from 6.3% last month to 6.9% Y/Y, slamming expectations of a 6.4% print and just shy of the highest forecast, driven by the recent surge in commodity costs and strong PMI surveys.
***
While there has been no reaction in the Yuan, either on shore or off, the stronger than expected PPI has pushed China’s 10Y yield to the highest in 30 months, or since April of 2015.

This post was published at Zero Hedge on Oct 15, 2017.

The Gold-Backed-Oil-Yuan Futures Contract Myth

On September 1, 2017, the Nikkei Asian Review published an article titled, ‘China sees new world order with oil benchmark backed by gold’, written by Damon Evans. Just below the headline in the introduction it states, ‘China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry’. Not long after the Nikkei piece was released ‘the story’ was widely copied in sensational analyses throughout the gold space. However, ‘the story’, as presented by Nikkei, doesn’t make sense at all. Allow me to share my 2 cents in addition to what I shared previously on the Daily Coin.
All the rumours and analyses on gold, oil and yuan that are making rounds now in the blogosphere are based on the Nikkei article. But the Nikkei article itself contains zero official sources. Basically, the whole story has been invented by Damon Evans. So, let’s start addressing the claims made in the Nikkei piece.
It’s true that the Shanghai Futures Exchange (SHFE) – not to be confused with the Shanghai Gold Exchange (SGE) – has recently set up a subsidiary called the Shanghai International Energy Exchange (INE), for foreign enterprises to trade a new oil futures contract denominated in yuan which is expected to be launched later this year (product symbol: SC). Specifications of the contract can be read here. In all official sources, though, there is no mention of gold. Officially this contract is not ‘convertible into gold’.

This post was published at Bullion Star on 15 Oct 2017.

Oil for gold – the real story

Following an article in the Nikkei Asia Review, which reported China will shortly introduce an oil futures contract priced in yuan, there has been some confusion about what it means. The article pointed out that in combination with existing gold futures priced in yuan, an oil exporter to China contracting to accept yuan could use these two futures contracts to take delivery of physical gold in payment for oil.
I was quoted in that article as follows:
“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,”i
The mechanism of introducing an oil for yuan contract could hardly be clearer, yet the rumour mill went overtime into Chinese whispers. Some analysts appeared to think China was authorising a new oil for gold contract of some sort, or that China would be supplying the gold, both of which are untrue.

This post was published at GoldMoney on October 12, 2017.

DOLLAR BLOW: China Launches New ‘Yuan-Ruble’ Payment Mechanism

The US received a major blow to its global hegemony, and one which is sure to trigger more fighting talk from hawks in Washington.
This week it was announced that China has established a ‘payment versus payment’ (PVP) system to clear Chinese yuan and Russian ruble transactions. The aim, we’re told, is to to ‘reduce risks and improve the efficiency’ of its foreign exchange system.
The new mechanism, which could rival the long-held monopoly of the US SWIFT inter-bank payment system (allowing for simultaneous settlement of transactions in two different currencies) was launched on Monday after receiving approval from China’s central bank, according to a statement by the country’s foreign exchange trading system.
However, financial oligarchs in Wall Street will view this move as an act of aggression in challenging the preeminence of the US dollar as the planet’s global reserve currency – which is inextricably tied and nearly completely dependent on the US ‘Petrodollar’ to prop-up the value of the US fiat currency. Georgetown University scholars note here:
Since petrodollars and petrodollar surpluses are by definition denominated in U. S. dollars, then purchasing power is dependent on the U. S. rate of inflation and the rate at which the U. S. dollar is exchanged (whenever there is need for convertibility) by other currencies in international money markets. It follows that whenever economic or other factors affect the U. S. dollar, petrodollars will be affected to the same magnitude. The link, therefore, between the U. S. dollar and petrodollar surpluses, in particular, has significant economic, political, and other implications.

This post was published at 21st Century Wire on OCTOBER 13, 2017.

Stocks Up and Yields Down

Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?
First, we think it’s a cop-out to say, ‘well it’s all subjective.’ If it were all subjective, then there would be no way to say that gold is good, and no way to say that it ‘should’ go up. It would be sufficient to say, ‘gold is $1,276.’ Indeed that is all that one could say, if everything were subjective.
Why is gold trading at that price? Subjective preference, nothing more. Will it trade at $12,760? Maybe. If subjective preference changes. One might as well say ‘if God wills it.’
But it is not all subjective. There is something objectively wrong with the dollar and all of its derivatives such as euro, pound, yuan, etc. They are all slowly failing. Gold is the alternative to holding the dollar.
It is important to keep in mind that most people do not like to buy on speculation. This may be particularly difficult to understand if you are someone who bought gold as a bet on its price. Most people buy, not because they expect a discontinuous change, but simply because they have goals to achieve.

This post was published at GoldSeek on Monday, 9 October 2017.

I Know What the Economy Did Last Summer Part 2: The Real Estate Rollover

In fact, I knew what the economy did last summer before summer even began. Since the beginning of the year, I have been writing that it appeared housing was reaching a new bubblicious peak and that the real estate market was getting ready to roll over. Just before the start of the summer, I confirmed that prediction by saying that it looked like that process had begun. I anticipate it will be a slow turnover at first, just as it was in 2007, which did not reach free fall until late in 2008. Likewise, I anticipate the present decline will not reach free fall until 2018.
While housing played out about as I expected this summer (see below), the more obvious collapse right now is developing in metropolitan commercial real estate, particularly in retail space due to the retail apocalypse. Even longtime commercial real-estate mogul Sam Zell warned last week that he would not consider investing any capital in retail real estate. In Zell’s words, the real estate landscape looks ‘like a falling knife.’
‘An area that’s in this much disarray, with so many weak players, is not an area where I would want to deploy capital at this time. And I’m generally a contrarian, and I generally rub my hands together at the opportunity for serious dislodgment, but I think what we’re dealing with here is very significant… It’s going to be very hard to take that shopping center land and redevelop it with all of these competing people having rights.’ (Newsmax)
Zell sees retail’s mortal throes as a violent struggle that is going to take a few years to play out.
A second problem the commercial real estate bubble faces (and Zell describes it as a bubble in that there is way too much space dedicated to retail in the US compared to other nations), is that Chinese investors are being forced to exit, and they have been a major support to that space. In Manhattan, for example, Chinese investors have made half of all commercial real estate purchases. The Chinese government decided this summer to squeeze that dry in order to stop the flow of yuan out of the country. In London and Australia, Chinese buyers accounted for about a quarter of commercial real-estate purchases. The Chinese government is pressuring Chinese banks to stay away from these deals.

This post was published at GoldSeek on Sunday, 8 October 2017.

Maduro Visits Putin, Proposes Global Oil Trade In Rubles, Yuan

Three weeks after the US imposed financial sanctions on Venezuela in an effort to cripple its economy and choke the Maduro regime, which in turn prompted Caracas to announce it would no longer receive or send payments in dollars, and that those who wished to trade Venezuelan crude would have to do so in Chinese Yuan, today during an energy summit held in Moscow, Venezuela’s president Nicolas Maduro proposed to expand his own personal blockade of the US, by proposing that all oil producing countries discuss creating a currency basket for trading crude and refined products. One which is no longer reliant on the (petro)dollar.
‘Developing a new mechanism of controlling the oil market is necessary,’ Maduro said on Wednesday at the Russian Energy Forum, being held in Moscow this week.
Quoted by RT, Maduro also blamed trade in crude oil paper futures as having an adverse impact on the oil market, which has undermined attempts by OPEC to stabilize prices. To counteract such “speculation”, Maduro proposed an alternative currency basket, one which is based not on the world’s reserve currency but includes the yuan, ruble, and other currencies, and which will mitigate the alleged adverse impact of futures trading.

This post was published at Zero Hedge on Oct 4, 2017.