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CHINA: New Leadership; Major Stock Low coming ?

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CN-00001 / Shanghai Index ... update : 6mo-close-up on 480d

 

cn1shang.gif

 

... Has rallied back to the 100wk / 480d-MA, which has proven important for Gold, etc

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(Received from Andrew Leung - by email):

 

A historic NPC/CPPCC (National People's Congress/Communist Party Political Consultative Committee) session has just drawn to a close. This is historic not just because it has formally installed an apparently more much dynamic new President and administration. This is also because China is at an inflexion point between possible corrupt sclerosis and vibrant rejuvenation.

 

Already heads of some senior corrupt officials are beginning to roll. The Railways Ministry, a gigantic behemoth and a law to itself, has just been broken up. Will China be up to the task of cutting the Gordian knot of vested interests?

 

This becomes even more challenging when internally China has to grapple with a looming aging demographic profile. Externally, China has to contend with America's pivot to Asia, a more assertive Japan, a disturbed South China Sea, a changed global energy landscape, and a Europe at crossroads. Is President Xi's China Dream beyond reach?

 

Yet this is also China's best of times. There is evidence that China's economy will become the world's largest sooner rather than later. The country's innovative capacity is growing rapidly as are her comprehensive power and global influence.

 

While no definite answers are likely, you may wish to trawl through some of the following for insights, ideas or food for thought –

 

China Overview

  • The China Dream is not so illusive but there are mountains to climb Click here

  • Where is China headed? (TV interview on CNBC) Click here

  • "Gearing UP" - What Foxconn tells us about China Op-ed article in the South China Morning Post

  • In face of multiple crises, China 3.0 needs to stay ahead with the times Click here

  • Enforcing the existing Constitution is the best hope for China's democratic reform? Click here

  • Is China's avowed new direction "a riddle, wrapped in a mystery, inside an enigma"? Click here

  • China and the world by 2030 – the shape of things to come according to Hu Angang of the Institute for Contemporary Chinese Studies, Tsinghua University Click here

  • China prepares to usher in new leadership (TV interview on Aljazeera English) Click here

  • China's Aging Trap - My article in The Global Analyst

  • China's one-child policy must be changed before it is too late (Op-ed article in the South China Morning Post) Click here

 

Geopolitics

  • Balance of Power - need for new thinking on US/China relations Click here

  • Time to re-think a more sustainable world order Click here

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China Stock-Index Futures Drop 1%, Signaling Equities Will Fall

BusinessWeek - 113 Minutes ago

China’s stock-index futures fell, signaling benchmark indexes will decline, as companies from Industrial & Commercial Bank of China Ltd. to China Cosco Holdings Co. (1919) reported earnings and amid speculation

 

cn1.gif

 

With More Lines:

 

cn1.gif

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2 Chinese Cities Move to Cool Overheated Housing Market

 

New York Times - ‎45 minutes ago‎

SHANGHAI - In an effort to cool the resurgent property market, two of China's biggest cities announced over the weekend that they would put in place a series of new restrictions and penalties on housing sales.

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CHINA Stock indices versus COPPER, Revisited

 

CN:00001 / Shanghai Index ... update : Lsma-CN1

21772420.gif

 

HK:2823 / Xinhua A50 China Index ... update

55404381.gif

 

FXI / /iShares Trust FTSE China 25 Index- quoted in US ... update

60685050.gif

 

CU / Copper etf / 3 years only! ... update

99018517.gif

 

FXC / Freeport McMoran ... update

58696424.gif

 

FXC bought a big energy business back in 201x, and that may have saved it from a bigger price drop.

A break of $30 with big volume, could lead to much lower prices.

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Yves Lamoureux / The "New Bond Guru"

 

Some of his recent calls:

=====

- end of the bond bull market

- the spike in european (i.e., PIIGS) bond yields during the recent euro crisis resembles an impulsive wave 1

- china stocks are in the early stages of wave 3 (of wave 3) and could target 2007 highs

 

I could see that China call working out (too)

 

CN:000001 / Shanghai Composite Index (INDEX) ... update

 

45433083.gif

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CHINA stock update :

 

Shanghai Index / CN000001 ... update

 

57388741.gif

 

A-50 China Index etf /HK:2823 ... update

 

82253906.gif

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  • 09:56 China April trade suplus $18.16 billion MarketWatch
  • 09:52 China April imports rise 16.8%, above forecasts MarketWatch

China stocks coming off the recent $10 Low

 

HK:2823

iShares FTSE/Xinhua A50 China Index ETF ... update

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1.

 

Nov 22, 2012

Chart of the Day: Chinese warning

 

Hopes for an early recovery in the global economy may be overoptimistic, according to a well-regarded economic strategist who says the expansion of China's reserves, which has been an engine of global economic growth, is about to come to a shuddering halt.

 

The attached chart shows how the growth of Chinese reserves has decelerated dramatically over the last five years and is now close to zero.

 

Screenshot2013-06-01at14824AM_zps113a5a31.png

 

. . .

 

Napier said of the graph: "It is the most important chart in the world. The growth in Chinese reserves has determined all the key developments in financial markets in the last two decades. It printed lots of currency and artificially depressed the US yield curve. It has been the cornerstone of global growth, and now it's over."

 

 

however . . .

 

2.

 

April 11, 2013

China's forex reserves reach $3.4tn

 

In January, the Chinese central bank vice-governor said China's stabilising foreign exchange reserves showed that the economy was increasingly well balanced. But three months after Yi Gang's comments, that balance is at risk of coming undone.

 

China's mountain of reserves reached $3.44tn - roughly the size of the German economy - in the first quarter, in an indication that the economy is once again facing heavy and unwanted capital inflows. The $128bn jump in the first quarter was the biggest quarterly increase since the second quarter of 2011.

 

. . .

 

 

and

 

3.

 

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Hang Seng Index (HSI) has drifted down to a support level ... HSI-update : CN--01 : HK-2823

 

83949562.gif

 

MORE CHARTS

- CN--01 / Shanghai Index

cn001.gif

 

HK-2823 / China 50 A-Shares

94911088.gif

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China Home-Price Gains Add to Dilemma on Cash Crunch: Economy

 

Bloomberg - ‎1 hour ago‎

 

Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth.

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CHINA stocks at Fresh Lows - HK2823 etf ... update

.yq7m.png

.

Has fallen to a new low, at the bottom of the channel.

What next? As the bad news flows out from China

.

.

CHINA stocks : Shanghai Index ... update

.a4z.png

.

Wow!

Look at Ping An Bank / CN-000001 etf ... update

.b1k.png.

The small and middle-sized banks are coming under the biggest pressure

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China Stocks Recover After Volatile Day

 

New York Times - ‎31 minutes ago‎

HONG KONG - Chinese stock markets swung wildly Tuesday, dropping to their lowest levels since early 2009 before recovering most of the day's losses near the end of trading, as investors struggled to gauge the impact of a lingering credit crunch on the ..

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KYLE BASS: If China Doesn't Change, 'We Will Likely See A Full-Scale Recession' Sometime Next Year

 

“The debt-to-equity ratios of Chinese companies are exploding as they funnel new capital, not into yield returning investments, but into the black holes on their balance sheets that have been created by a slowing growth environment. In the industrial sector, there is even outright deflation as overcapacity finally takes its toll,” the letter reads.

 

“The speed and depth of the Chinese policy response will help determine the severity and duration of this crisis. If the Chinese address the issue quickly and move decisively to rein in credit expansion and accept a period of much lower growth, they may be able to use the government and People’s Bank of China’s balance sheet to cushion the adjustment in the economy,” Bass wrote. “If, however, they continue on the current path and allow this deterioration to reach its natural and logical limit, we will likely see a full-scale recession as well as a collapse in asset and real estate prices sometime next year.”

 

That’s a big get (new member?) for the team China bear.

===

/more: http://au.businessin...dit-fear-2013-7

 

 

SHANGHAI Index ... update

 

f4g.gif

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  • China Aims to Help Small Businesses
     
    China's central bank said it would encourage banks to lend more to smaller firms and encourage companies to tap the bond market, but analysts said the move would have a limited impact.

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Stock prices versus GDP growth

======

 

China-GDP-YoY-and-QoQ-annualised-IHS-Insight.jpg

/source: http://ftalphaville....d-non-recovery/

 

You may find this material interesting.

I have been looking into a conundrum:

 

The big "disconnect" between China's rapid growth, of recent years, and stagnant stock indices.

In 10 years, from 2002-2012:

+ China's GDP is up 67.1%,

+ Shanghai Composite is up 466.%,

=

This is a big difference, and it is interesting to explore why.

I also look at how US stock prices have related to GDP over time.

 

My bottom line is that I think Chinese stocks may be near an important bottom,

while US stock indices may be set for a pullback.

If I am right, we shall see some sort of Turn within August.

 

===

LINK: http://tinyurl.com/GEI-GDP

(lots of Charts and Data there - Please pass the link on.)

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Shanghai Composite vs. HK's A50 Index

 

The A-50 Inddex trades like a higher beta version of the Shanghai Index, and it may be a good idea to chart them together.

 

SHcomp vs. HK-2823 / Shanghai Composite vs. HK's A50 Index ... VERSUS : SHcomp : HK-2823

 

psay.gif

 

HK2823 on its own : update: 7-years: 2823 -VS- SHcp : 2-yrs : 6mos

 

la3.gif

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Were you Bullish on China 2-3 Years ago ?

 

The vast majority of people who are bearish on China's economy and stock market now were cheerleaders just 18 months ago. It represents a remarkable 180 degree turn that's little talked about. Rather than focus on the mix of self-interest and self-delusion involved in this, I want to instead look at why so many got China wrong in the first place. The finance industry isn't known for introspection but it seems to me that there are valuable lessons to be learned from this episode.

 

Because the list of those who were positive on China from 2009 to 2011 and called it incorrectly is as high profile as it is lengthy. It includes the man known as Britain's Warren Buffett, Anthony Bolton, famed investor Jim Rogers, star economists such as Stephen Roach, almost every stockbroker, and thousands of companies who bet big on China and lost. All were wrong. Some disastrously so.

 

This newsletter isn't about rubbing their noses in it. For the record, I still have immense respect for the likes of Bolton, Rogers and Roach. But it's clear that they made significant errors, ranging from buying companies in industries with immense over-capacity issues, to having misplaced faith in Chinese leaders' ability to manage the economy and a belief that Chinese demand for goods, overinflated by extraordinary stimulus, would continue unabated for many years. The aim here is to examine these errors to help you to avoid making similar mistakes in future.

 

http://www.zerohedge...-it-wrong-china

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Chinese Province 'Busted' For Fake Data; Exaggerated 2013 Output By Over 150%

 

 

Still believe that China's PMI is above 50 and suggesting a global growth expansion? Still believe in Santa and the Tooth Fairy? Well, none other than China's own National Bureau of Statistics has been forced to admit that at least one of its major provinces has dramatically overstated industrial output. As Sina reports, according to a NBS report, the government in China's Yunnan province had coerced local companies to report inflated industrial output value, resulting in artificially high economic figures. With government leadership promotions driven by the performance of economic numbers in each province, it should hardly be surprising but the scale of the fraud is remarkable. In 2012, one county in Yunnan province reported CNY6.34 billion in output while audits showed only CNY 2.82 billion and in the first half of 2013, Yunnan published CNY 2.75 billion in output while audits showed a mere CNY1.06 billion! The province was also found to have faked investment data.

 

http://www.zerohedge...output-over-150

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China Trade Rebounds in Further Sign Economy Stabilizing

Bloomberg

China's exports increased more than estimated in August, adding to evidence the world's second-largest economy is rebounding after a two-quarter slowdown.

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WHAT GLD is Losing, may be getting picked up by China

 

Comment by kuuleimomi on October 25, 2013 @ 11:56 am
FOREIGNERS DUMPING US TREASURY BONDS

Foreigners sold more US$-based securities in June than after the Lehman Brothers bankruptcy. The USFed must lap up what is dumped.

The USFed must accelerate the QE bond monetization program, not reduce it.

COMEX VACANT GOLD VAULT
The COMEX registered gold continues to plummet, down to 665k oz gold in a recent snapshot. Members must distrust JPMorguen deeply. They are either removing their eligible gold, or refusing to put it among the registered stock. Pressures for a default are rising every month without respite.

Refer to the COMEX Registered Warehouse gold in their official vaults.

Further investigation reveals JPMorguen taking gold from Scotia Mocatta under certain hidden threat, as well as from HSBC and other big banks.

CHINA GOLD IMPORT VIA HONG KONG
China imported an impressive 116.4 tons of gold in July. The exponential rise continues unabated in 2013.
China is the Asian juggernaut on gold demand, and the primary engine for demand in the entire world. Their demand approaches half of global mining output.

===

> http://benjaminfulford.net/2013/10/22/like-a-junkie-selling-family-heirlooms-the-us-corporate-government-buys-time/#comment-242921

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What Next ?

 

China's Credit Crunch - is it returning?

 

There was one in the middle of the year, and China is fighting it again

 

HK-2823 : HK-quoted etf for China stocks ... update

 

c4v3.png

 

China Cash Crunch hits Stocks, Bonds - WSJ

 

"A Cash squeeze rippled through the Chinese financial system last week, despite three days of liquidity injections"

==============

+ The situation worsened on Friday, when interbank rates hit 8.2%, highest since the summer

+ Stocks on the Shanghai market fell for the 9th consecutive day

+ The 10-year bond rate hit the highest level in eight years

+ PBOC (China's central bank) has injected 300 billion yuan ($49.4 Billion) over the previous three days

 

This is being driven by a scramble for funds going into the year end, to meet funding and regulatory requirements

 

China's banks are under stress - some are now trading below book value

 

Shadow banking financiers are reliant to short term loans, and many loans will mature at the end of the year.

 

From today's Asian WSJ:
"The big worry is that the cash shortage could lead to a bank defaulting on its loans, which could spark chaos in the markets"

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CHINA and HK Bank Charts

=================


HK:05 / HSBC Holdings : 5yrs : 2yrs

w67.gif


HK:11 / Hang Seng Bank : 5yrs : 2yrs

gd4.gif


HK:3988 / Bank of China : 5yrs : 2yrs

e6v.gif


HK:1398 / ICBC / Ind. and Com'l Bank of China : 5yrs : 2yrs

ef0.gif


HK:3328 / Bank of Communications : 5yrs : 2yrs

yczy.gif


(Compare)

HK:HSI / Hang Seng Index : 5yrs : 2yrs

2sk4.gif


===




CHINA and HK Bank Charts

====================

HK:05 / HSBC Holdings- : http://tinyurl.com/bank-hk5

HK:11 / Hang Seng Bank : http://tinyurl.com/bank-hk11

HK:3988 / Bank of China : http://tinyurl.com/bank-hk3988

HK:1398 / ICBC Bank---- : http://tinyurl.com/bank-hk1398

HK:3328 / Bank of Comm : http://tinyurl.com/bank-hk3328

HK:3968 / ChinaMerch.Bk :

(Compare)

HK:HSI / Hang Seng Index : http://tinyurl.com/bank-hsi

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Free Press ?


China presses media to tone down cash crunch story - Dec. 22, 2013


Chinese propaganda officials have ordered financial journalists and some media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue when markets reopen on Monday.

Short-term interest rates for loans in the interbank market shot up last week in an apparent repeat of the cash crunch in June that panicked investors and exposed serious weaknesses in China’s debt-laden financial markets.

. . .

One large, state-owned, online news portals on Sunday, coverage of the biggest financial story right now in China was limited to a few short factual reports placed in less prominent positions on their sites.

Independent outlets known for their hard-hitting commentary and investigative reporting into China’s financial markets barely mentioned the topic on their homepages.


Caixin, regarded by many as the premier Chinese financial news outlet, featured just a short blog post on the topic buried near the bottom of its homepage.

The top story on the subject from Caijing, Caixin’s main rival, consisted of nothing more than the brief statement released by the central bank on Friday.

===


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The History of the recent bank stress


14-Dec: Telegraph.co.uk

Bank of America advises China default contracts to hedge debt storm

==

Bank of America has advised clients to take out default insurance against Chinese debt, warning that monetary tightening by China’s central bank risks setting off a bout of serious credit stress in 2014.

Bin Yao, the bank’s credit strategist in Asia, said Chinese bond yields have already risen to the highest in a decade as the authorities seek to rein in rampant growth of the M2 money supply and excess credit, yet markets remain “complacent” about the implications.

He recommends buying credit default swaps (CDS) on five-year Chinese debt as the easiest way to “hedge the China tail risk”.




23-Dec: Ambrose Evans-Pritchard

China's cash crunch threatens Shadow Banking shock

The credit squeeze in China is no longer a local issue and any misjudgment by the central bank will have global ramifications

=

Fitch Ratings says the biggest risk may lie in China’s wealth management products, a “hidden second balance sheet” of the banks alone worth $2 trillion.

Half of all liabilities have to be rolled over every three months and a further 25pc every six months. There are reports that some are already under water

. . .

Hot money has been pouring into the country on a wave of optimism after the Communist Party’s Third Plenum in November, which promised a blitz of reforms. This raises the likelihood of even more violent outflows if the music stops, a risk that has risen since the US Federal Reserve began winding down dollar stimulus last week.

The latest spike in rates goes beyond safe levels. The central bank injected almost $50bn in liquidity late last week to stabilise the market, even taking the unprecedented step of broadcasting the move on Weibo, China’s Twitter.

The Financial Times said propaganda authorities have ordered China’s journalists to stop writing gloomy articles about the cash crunch, a sign that events may be slipping out of state control.

The central bank has a trump card if efforts to deflate the credit boom gently spin out of control. “They can cut the reserve requirement ratio (RRR) at any time,” says Daokui Li from Tsinghua University.

Lenders have parked $3 trillion with the authorities to meet the RRR rule of 20pc. Yet J Capital Research in Beijing says this is “deceptive”, failing to capture the scale of shadow banking. The real rate may already be down to 15pc, while the loan-to-deposit ratio may in reality be 90pc rather than 75pc as claimed. If so, China’s safety buffer is less than supposed.


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