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CHINA: New Leadership; Major Stock Low coming ?

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Are China bank stocks cheap or just crummy?
 
23 Dec 2013 | China banks are trading at bargain basement valuations, but analysts can't agree on whether they're cheap or just crummy.
The sector just got even cheaper, with Hong Kong and China listed bank shares falling around 5.5-7.3 percent over the past two weeks as interbank rates spiked higher on a seasonal liquidity squeeze, before posting a slight recovery Tuesday as rates eased.
. . .
The question came into sharper focus earlier this month when China Citic Bank said it would seek shareholder approval to increase its write-offs to around 5.2 billion yuan, or around $860 million, spurring concerns over whether the entire sector's loan quality may be slipping.
. . .
Hao Hong, Managing Director, Research at Bank of Communications (International), says the fact that Chinese firms are willing to borrow at high interest rates is a worrisome sign.
While Citic's nonperforming loans are among the worst for mid-sized China banks, it isn't clear if that's because the bank is more proactive in writing down loans. Citic was China's 12th largest bank by asset size at the end of 2012, according to data from S&P.
"When you come closer to a situation where you can gauge or that the black box risk is visibly receding, then you can grant a higher valuation" to the sector's stocks, Issel told CNBC. He expects signs the government is pressing ahead with planned reforms for the sector can spur a re-rating.
Others disagree.
"Reform comes with a huge cost of dislocation in the real economy," said Hao Hong, managing director for research at Bank of Communications.
 
While many banks are trading below book value – Morgan Stanley puts the average at around 0.8 times 2014 book value – Hong noted the sector traded at even lower valuations of around 0.5 times during the financial crisis. "Valuation can go lower from here," he told CNBC, citing earnings concerns.

 

http://www.cnbc.com/id/1012944

 

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REALITY about to hit?
Did they really think those high returns were risk free?
(as per the SCMP article):
"Investors have yet to lose money... They believe the banks and trust funds that create and sell the instruments will ultimately back them - even though they make no such guarantees"
One customer said:
"I don't care where the fund is invested. I haven't looked at the relevant documents carefully. I trust the trust company. It's very reputable."
(haha. Does this sound familiar? I recall the I-kill-you-later losses, and the Lehman's bonds.)
A drop-off in credit availability in shadow banking is sure to slow China's rapid growth rate.

 

BIG TROUBLE in China's shadow banking

 

zqhx.jpg

 

(1)

CAUGHT IN THE SQUEEZE (SCMP, pg. B5)
The mainland's clampdown on the lending market is beginning to bite its interest rates rise sharply, funds dwindle and default worries mount
Co. owner Liu: "I'm really lucky to have secured the loan. It's extremely hard to obtain credit these days."
Thanks to a clampdown on shadow banking... the market is fraying at the edges, pushing up funding costs for the small to medium sized firms.
On Friday, the 7-day repo cost ran up from 4.35% on Thursday. to above 7 per cent. Trust co's source their funds thru the interbank market.
Looming above this, is the possibility of a default of a three billion yuan wealth management product at the end of the month. The firm backing the instrument, Zhenfu Energy. a coal miner, has gone bust.
There's a contagion risk. Other companies may have trouble rolling over their financing.
The SCMP article gives an example where "ABC Property" borrows at 12 percent from a Trust co', and the Trust co. funds itself at 6 per cent thru a "wealth management product". It is not clear, who will "take the hit" on the Zhenfu collapse. It may be the Trust co. But once its capital is wiped out, those buying the wealth mgmt product will also be hurt.

 

(2)

Mega Default In China Scheduled For January 31
On Friday, Chinese state media reported that China Credit Trust Co. warned investors that they may not be repaid when one of its wealth management products matures on January 31, the first day of the Year of the Horse.
The Industrial and Commercial Bank of China sold the China Credit Trust product to its customers in inland Shanxi province. This bank, the world’s largest by assets, on Thursday suggested it will not compensate investors, stating in a phone interview with Reuters that “a situation completely does not exist in which ICBC will assume the main responsibility.”
There should be no mystery why this investment, known as “2010 China Credit-Credit Equals Gold #1 Collective Trust Product,” is on the verge of default. China Credit Trust loaned the proceeds from sales of the 3.03 billion-yuan ($496.2 million) product to unlisted Shanxi Zhenfu Energy Group, a coal miner. The coal company probably is paying something like 12% for the money because Credit Equals Gold promised a 10% annual return to investors—more than three times current bank deposit rates—and China Credit Trust undoubtedly took a hefty cut of the interest.
==

 

=

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On China's Woes

 

> http://www.testosteronepit.com/home/2014/3/28/chinas-monumental-ponzi-heres-how-it-unravels.html

 

China’s Monumental Ponzi: Here’s How It Unravels
David Stockman / March 28, 2014

( By David Stockman, Budget Director under President Reagan and author of the bestseller,

The Great Deformation: The Corruption of Capitalism in America. This article originally appeared on David Stockman’s Contra Corner.)

China is the greatest construction boom and credit bubble in recorded history. An entire nation of 1.3 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing. The source of this demented outbreak is not a flaw in Chinese culture or character—nor even the kind of raw greed and gluttony that afflict all peoples in the late stages of a financial bubble.

Instead, the cause is monetary madness with a red accent. Chairman Mao was not entirely mistaken when he proclaimed that political power flows from the end of a gun barrel–he did subjugate a nation of one billion people based on that principle. But it was Mr. Deng’s discovery that saved Mao’s tyrannical communist party regime from the calamity of his foolish post-revolution economic experiments.

Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40 million and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press. And that’s the heart of the so-called China economic miracle. It’s not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; it’s a monumental case of monetary and credit inflation that has no parallel.

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—so America has been burying itself in debt at nearly a 7% annual rate.

But move over America! As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion. But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economics from Mao’s Little Red Book!

That means there was no legitimate banking system in China—just giant state bureaus which were run by party operatives and a modus operandi of parceling out quotas for national credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages. There have never been any legitimate financial prices in China—all interest rates and FX rates have been pegged and regulated to the decimal point; nor has there ever been any honest accounting either—loans have been perpetual options to extend and pretend.

And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $10 trillion dollars during this century alone—that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison. Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies. When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief—a courtesy that the regime has invariably granted.

So in two short decades, China has erected a monumental Ponzi economy that is economically rotten to the core. It has 1.5 billion tons of steel capacity, but ”sell-through” demand of less than half that amount— that is, on-going demand for sheet steel to go into cars and appliances and rebar into replacement construction once the current pyramid building binge finally expires. The same is true for its cement industry, ship-building, solar and aluminum industries—to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping malls and new cities.

In short, the flip-side of the China’s giant credit bubble is the most massive malinvestment of real economic resources—labor, raw materials and capital goods—ever known. Effectively, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods with glass, cement and rebar erections that can’t possibly earn an economic return, but all of which has become “collateral” for even more “loans” under the Chinese Ponzi.

China has been on a wild tear heading straight for the economic edge of the planet—that is, monetary Terra Incognito— based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” becomes the next man’s “asset”.

Thus, local governments have meager incomes, but vastly bloated debts based on stupendously over-valued inventories of land. Coal mine entrepreneurs face collapsing prices and revenues, but soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves. Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stock piles of copper and iron ore at prices that are already becoming ancient history.

So China is on the cusp of the greatest margin call in history. Once asset values starting falling, its pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week is the final catalyst, but if not there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too:

Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to find capital for years; the chairman is suspected of borrowing up to US$38.6 million with “fake mortgages.”

But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (local government officials insist it hasn’t officially defaulted yet).

Xingrun’s business in Fenghua, a county-level city that is part of Ningbo in a manufacturing belt on China’s east coast, ran into trouble through a renovation project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the first half of 2012. Xingrun projected that it could pay off its debts within three years.

The project never got to the construction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years.

That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed at high rates from private lenders.

One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afflicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered confidence in developers’ ability to pay dizzyingly high interest rates.

Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch of a commercial bank for more credit. The local branch would take that risk because loan officers there knew that, somewhere much higher up the chain, officials promoted the lending.

That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable.

High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.

Fenghua is a small town, and Xingrun’s reach beyond that area is limited. Analysts have come out strong in saying that such a default has little systemic risk. The bigger picture in the region, however, can’t be ignored.

Xingrun’s woes are still the woes of the local authorities. The default will add US$305 million (RMB1.9 billion) to Fenghua province’s non-performing loan portfolio, pushing up the rate of toxic assets to 5.27% and making it Zhejiang province’s most indebted government, according to calculations by The Economic Observer newspaper.

Add Fenghua’s problems to those of the greater Ningbo region. The area reportedly has at least six years of housing stock either sitting empty or under construction. The massive buildout will put small developers under great pressure to pay back loans, especially if private debtors are calling in high-interest loans. A slowdown in property prices won’t help either. Without a rescue from provincial-level banks, Fenghua won’t be the last local government stuck in a jam.

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MORE CHINA WORRIES

 

Excess Chinese Housing Inventory

chart1small.jpg

 

Mr Mao said China’s house production per 1,000 head of population reached 35 in 2011. The figure is below 12 in most developed economies “even when the housing market is hot; no country has a figure of greater than 14”.

“By 2011, housing production per 1000 people reached 30 in Tier 2 cities, excluding the construction of affordable houses. A persistently high figure such as this should cause alarm,” he said.

China’s anti-corruption campaign is spreading terror through the Party cadres. They are frantically trying to offload properties in the top-end range of 40,000 – 50,000 yuan per square metre in case their ill-gotten wealth is exposed by spot audits.

==

> http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100027199/chinese-anatomy-of-a-property-boom-on-its-last-legs/

Scary.

Yet, home buying was mostly financed with cash - so more of a "value trap" than a banking headache

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Chinese Cities become the Least Affordable in the World

Beijing ----- : 23x
Shanghai - : 16x
Shenzhen- : 13x
Hong Kong : 13x
Tiajin--------- : 10x
Tokyo-------- : 10x
Sydney------- : 9x
Guangzhou : 8x
London----- : 7x
Chongqing- : 6x
New York--- : 6x
LosAngeles : 5x
Toronto ----- : 5x
Wellington-- : 5x
Singapore - : 4x

> From Chart, per today/s FT: pg. 20
 
Chinese banks started issuing home loans in 1997. (As recently as 1994, no dictionary in Beijing had a translation for the English word, "Mortgage."
People were warning of a Chinee property bubble back in 2008. But since 2008, "Beijing decided to refill the bubble with a tidal wave of credit."
"The result was an immediate rebound as total debt in the economy rose from 140 percen of GDP at the end of 2008, to more than 250 percent at the end of June (2014)"... In just two years - 2011 and 2012 - China produced more cement than the US did in the whole of the 20th century."
More than 90 percent of households own at least one home... And for those urban households that own apartments, nearly 76 percent of their assets are in real estate.

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Given how much is in real estate and the falling (in some cases negative) returns I would assume that more of people's savings will be diverted to equities going forward.

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Given how much is in real estate and the falling (in some cases negative) returns I would assume that more of people's savings will be diverted to equities going forward.

 

Probably...

+ After the Stock market falls (Triggered by falls in the West) are out of the way

+ Precious metals cannot take it all

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That HUGE STOCK MARKET crash in CHINA, Still happening has wiped many people out. OUCH! its lured in many novice traders who have quit their jobs,

and put all their lifesaving in the market hoping to make themselves rich, however things have gone terribly wrong for these investors recently as they do not know what they are doing!!

Here is just one story! Absolutely heart breaking. This novice farmer investor has basically lost his entire lifesaving’s and also his entire family fortune as well. Watch the video here ==> http://www.bit.ly/1fMcakI

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Mr Li is SELLING his assets in China.

Worth considering this rationale - could be behind some stock movements...

 

 

http://www.zerohedge.com/news/2015-08-02/china-admits-it-lied-about-its-local-debt-levels-local-billionaires-are-quietly-liqu

 

As China Admits It Lied About Its Local Debt Levels, Local Billionaires Are Quietly Liquidating Their Assets

 

It was almost exactly two years ago, when during China's long-forgotten attempt to actively deleverage its economy (remember that? good times...) we commented on the country's s first attempt to estimate what its local government debt is since June 2011.

This is what we said in July 2013:

Not at all surprisingly, after conducting the goalseeked "exercise" of estimating its local government debt, the final number was well below the worst case or even average scenario, while the level of NPLs was at a very leisurely pace around 1% of total.

We promptly accused China of doing what it does best: fabricate the data, but since the housing bubble was still raging (it has since burst), and the stock market bubble (which also popped a month ago) was yet to be unveiled, few cared. Furthermore, in early 2015 China unveiled an LTRO-type plan in which in would swap out maturing local government debt with long maturities, thus hoping to firmly shove the problem with unsustainable local government debt under the rug for the (un)forseeable future.

Then overnight something unexpected happened: Sheng Songcheng, the director of the statistics division of the People's Bank of China (PBOC), was quoted by the National Business Daily on Saturday whereby he essentially admitted China had been lying about not only its local debt exposure but the level of NPLs across the economy.

 

Quoted by Reuters, Sheng said that "downward pressure on China's economy will persist in the second half of the year as growth in infrastructure spending and exports is unlikely to pick up."

He said that Chinese companies are not optimistic about business prospects according to the central bank's second-quarter survey, and that :pressured by uneven domestic and export demand, cooling investment and factory overcapacity, China's economic growth is expected to slow to around 7 percent this year, the lowest in a quarter of a century, from 7.4 percent in 2014."

. . .

 

WSJ reports that having glimpsed what is coming over the horizon, China's wealthiest are quietly starting to dumb their holdings to the greatest fools: "A property developer backed by Hong Kong billionaire Li Ka-shing has put an office and retail property project in Shanghai up for sale, according to two people familiar with the matter. A sale would mark the latest China property divestment by the investor, one of Asia’s richest, who is closely watched for signs of how he sees markets shifting."

This is not the first time Ka-Shing has cashed out in recent months:

In June, Mr. Li’s Cheung Kong Property Holdings Ltd. put up for sale Century Link and Century Link Tower, a shopping mall and twin office towers currently under construction in the Pudong Lujiazui area, said people briefed on details of the offer. A Cheung Kong spokeswoman didn’t respond to requests on Sunday for comment.

Or just before the market crashed. And then more previously:

Over the past two years, companies backed by Mr. Li and his family have sold five office and shopping mall projects in Shanghai, Beijing, Nanjing and Guangzhou. Many investors eye moves by his companies for hints on the tycoon’s view of the property market.

 

His companies, including Hutchison Whampoa and ARA Asset Management Ltd., have been offloading their real-estate assets as China’s economy decelerates to its slowest growth in more than two decades.

 

He said that Chinese companies are not optimistic about business prospects according to the central bank's second-quarter survey, and that :pressured by uneven domestic and export demand, cooling investment and factory overcapacity, China's economic growth is expected to slow to around 7 percent this year, the lowest in a quarter of a century, from 7.4 percent in 2014."

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CHINA (Shanghai Composite Index) may not be far from an important low

CN: ShComp ... update

shcomp_zps9qgzanz1.gif

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CNY and China stocks ... A rally may have started in China

On 2/18/2016 at 4:57 AM, Roddy said:

Been a while since I visited this parish....

 

Thinking:

(1) The world is focused on China being forced to devalue

(2) But I think they may be missing something

(3) The key chart to look at is JPYCNY - the Yen has devalued significantly vs the Yuan - surely this has changed China's terms of trade and also the same applies to the rest of Asia?

(4) Secondly the 'trllemma' says if u have a fixed exchange rate you can only control two of the following 3 - exchange rate / interest rate / money supply - the world is assuming that China will choose to devalue - I disagree...

 

It is interesting that you should post about China and the Yuan.

I think most people have been watching the Shanghai Index (in CNY) ... All data : 3-yrs : 1-yr : 6mos

ShComp-all_zpslo45rpqb.gif

But if you look at China stocks in HKD / USD - they have already corrected virtually the entire Bull market of 2015

HK-2823 / iShares FTSE A50 China Index ETF ... All data : 3-yrs : 1-yr : 6mos //

HK2823-all_zps5rxspmc0.gif

HSI: All : 3-yrs

HSI-All_zpsbqq5m8cz.gif

 

Can people who see this chart deny that the Bear market, or a key leg of it might be DONE already

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The Rally in HK stocks may be ending

HK:HSI / Hang Seng Index near 23,000 ... update - at 22,932, back to 610d MA

HSI_zpszewtplbx.gif

China too?

CN:ShComp / Shanghai Composite Index ... update

ShComp_zpsvvpbgidd.gif

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China: new bull market underway?

Posted on September 8, 2016 by tony caldaro

If it wasn’t for the quantification of waves by OEW this volatile index would look more like a commodity index than a stock index. When reviewing the entire history of the SSEC we see a series of volatile up moves followed by longer and less volatile down moves. In fact, nearly all of the bullish trends have lasted only 1-2 years, while the bearish trends have taken as long as 4 years.

ssecmonthly.png?w=640&h=485

 

After a very volatile beginning in the early 1990’s the SSEC settled into a nice 5 waves up from 1994-2001: Primary I. Then after a 4-year bear market into 2005, Primary II, the SSEC finally joined the 2002/03-2007 worldwide bull market. The early stages of Primary III, 2005-2007, were almost unnoticeable. A series of small waves setting the stage for what would become a six-fold advance in only two years. The bear market that followed, Primary IV, has been the tricky part for nearly everyone.

The key to this long term count remains the Primary I high back in 2001 at SSEC 2245. Since fourth waves cannot overlap first waves, and two of the down legs did, the only pattern that could describe this choppy 9-year activity is an expanding triangle. As long as a fourth wave triangle terminates above the first wave high the pattern is acceptable. And this is what we believe has just occurred, after tracking this pattern for a number of years.

ssecweekly.png?w=640&h=485

The weekly chart displays all of Primary waves III and IV. Notice how all the up legs, Primary III, and Majors B and D, all started off with a series of non-descript small waves setting the stage for the surge that would follow. The market appears to be at a similar juncture again. If the January, 2016 low ended Primary wave IV, as we suspect, the SSEC is now setting up for a move to all time new highs in the next 1-2 years.

This is not an investment recommendation, as we do not make recommendations. We only track the waves and report the most probable path based on this analysis. We suggest everyone do their own analysis and make their own investment decisions. If you would like to track the SSEC along with us, you can find the charts by scrolling down using the following link: https://stockcharts.com/public/1269446/tenpp/8. Best to your investing!

> https://caldaro.wordpress.com/2016/09/08/china-new-bull-market-underway/

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Money is fleeing China... but is going into Bitcoins and foreign Real Estate, not Gold (which is under-pressure in India)

 

On 12/23/2016 at 6:03 AM, DrBubb said:

Checking the B.S. Against reality

Schmidt: "A Senior elder in Hong Kong, China has been paid"

Dec. 14th, Overview of the RV/GCR Process

"Private exchanges in Reno have been closed for over a year.

After round one is completed, there will be a wait for round two..."

A big So What!.

Even if true, If you think ordinary people will see any of this money, you are kidding yourself.

Once again, this is completely lacking in useful detail.

Don't turn any of your money over to him!

Comments

Although you seem to be honest you sound to me like a con artist, are you? In other words you say it is going to perhaps take another two years. When I was first led to believe that this was the money that had been stolen from the people and mostly by the banks. so it's not to return the money taken from the people but just as a hand out . Keep your fucking money. .
 
Is this correct? 25,000 x 30 (3,000%) = 750.000 750,000 X.2 (20%) = 150,000 750,000 x .8 (80%) = 600,000
 
The biggest problem, as I see it would be distributing the funds uniformly. There needs to be a Central Consulting Firm to coordinate the distribution of funds. This group must know what projects are already funded and which ones have been left out. They would need very High Level Contacts in all countries. It would be very difficult to distribute funds in a foreign country without the help of the Government or some large organization. The NDAs may make it difficult to know what has already been funded and what is not funded.
 
Don't turn you currencies over to ANYONE! That goes for "groups" too! See Gary Larabee's latest utube video with advice from "One who believes". He warns of this!
He talks about the rise of Shenzhen, but the reality is that money is leaking fast, fleeing China - as fear about a financial crisis there spreads.

Here's the US currency expressed in Chinese Yuan

US$ in CNY ... 1-yr : 2yrs : 5yrs : All :

Low was 6.05, Last CNY-6.95 - that's a 15% drop in CNY value !

CNY-5yrs_zpsgnxzdnst.gif

 

Bitcoin : The uptrend continues as money flees China: BTC recently hit $860 - Sell, if/when it matches the Gold price in the weeks to come
=======
Charts: Bitcoins LIVE : BTC:1-year : 4-mos : 10d : Ticks : BtcWisdom : BTC-24hours : PB : aD : aF : aG : sjw :

chart.png?m=bitstampUSD&v=1&t=S&noheader

Why do you think BTC is going up? It is a way of moving currency out of China

 

Why Are China's Rich Moving to the US? | China Uncensored

Published on Oct 2, 2015 - over 1 year ago

China's wealthy are moving to the US and they seem to have taken an interest in real estate.

What does their immigration mean for China? Find out on this episode of China Uncensored!

China's stock index - expressed in Rmb ... update

ShComp_zpsg96dogf8.gif

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Two-year cycle in China, & Emerging Markets - could bottom in about one year

Look how closely they move together!

A negative year ahead for all three? (and China too, unless the RMB collapses)

"BEAR CASE" - if the market stays weak

EEM - vs. FXI and Hk-HSI ... update : EEM-alone : FXI : HK-HSI : HK-10 : CN:ShComp :

EEM-etc_zpshafpnrny.gif

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Jim Rogers is STILL BULLISH on China

May 18, 2018

Jim Rogers on where to invest your pension fund: China, maybe Gold

Jim Rogers needs little introduction.

He’s the man behind the Quantum Fund – one of the most successful hedge funds of all time. Jim is an investing legend, best-selling author and Guinness World Record holder. So when he speaks, smart investors listen.

I’ve had the pleasure of sitting down with Jim a few times to get his thoughts on the markets… life lessons… and where investors should put their assets today.

What follows are a few excerpts from our conversations…

Why you need to be invested in China

Kim: If you were buying assets to put into the retirement accounts of your two daughters, what would you invest in? In other words, how do you see markets unfolding over the long term?

Jim: If you sold U.S. stocks in 1916, you’d have looked smart for a year or two. But over the past century, of course, the U.S. has been the big story. And in coming decades, China will continue to emerge. It’s going to be the big story. So with that kind of time horizon I’d be looking to buy shares of Chinese companies, and looking past the challenges that China is facing now and will continue to face in coming months.

Kim: What about, when we're speaking of China, the One Belt One Road Initiative? When you look at that, do you see it as this enormous investment opportunity, or do you see it as a geopolitical black hole that China is just shoveling money into?

Jim: It may be both, but it's certainly a great opportunity.

It's rare that geography changes. Five hundred years ago, the Spanish and the Portuguese started sailing around the world, changed geography. Two hundred years ago, we found the railroad, changed geography. In America, there's a city called Chicago, everybody's heard of Chicago. But Chicago is only there because of the railroad. Denver, a big city in Colorado, is only there because of the railroad. The railroad, for example, totally changed world geography.

The Chinese are doing the same now with One Belt One Road. Some people are going to make vast fortunes. If you're left out, you're going to disappear and nobody will ever hear of you.

I live in Singapore. And Singapore's going to have problems because much of what will be transported is going to go around Singapore. Part of Singapore's key to success in the past 50 years is its port. As Asia started booming, this port became the most important port in the world.

Well, now it's not going to be the most important port in the world. So some people are going to suffer, some people are going to boom. Kazakhstan, Central China, many places are going to actually boom now because of this. Figure out where and you'll get rich. You get the wrong places, nobody will ever hear of you. There are cities in America that nobody ever heard of because they disappeared – because the railroad went the other way.

Gold… farmland… and real estate

Kim: All right – China. Where else should people put their pensions?

Jim: Beyond that? Maybe gold. It’s preserved its value over long periods of time.

That, and a farm in North Korea. I’m a big believer in agriculture and farmland. And at some point North Korea will join the rest of the world.

Agriculture is probably going to do well, even if the world comes to an end, because agriculture has already been going down the tubes for 35 years now. Agriculture has been terrible. I would suspect that's a place to rescue yourself.

Probably the best thing to do is to become a farmer. I'm not going to become a farmer. But if people want a new life outdoors, especially in China, the Beijing government is doing everything it can to help farmers and to help the countryside. So agriculture, especially in China. And Russian agriculture because of what's happening with sanctions. But agriculture worldwide.

Kim: You mentioned farmland, being a farmer. What about real estate more generally?

Jim: Well, Kim, it's a big world out there. I wouldn't buy a property in New York or Hong Kong. But I might buy a farm in Central China or in the agriculture part of China.

There are bubbles in Qinghai, certainly there are other Chinese bubbles. New York has already started going down, London has already started going down. These were bubble cities.

If you want to buy a property, what I suggest you do is go to China and buy a farm. Get yourself a Chinese wife who's a farmer and you'll be very, very happy.

These markets should also be on your radar

Kim: What other markets are on your radar?

Jim: Well, Vietnam. I don't know if I mentioned it last time. Vietnam is doing very well right now. I prefer the bad things that are hated. But there are big changes in the country, and it's right on the Chinese border. It's a country of 90 million people, educated, disciplined, hardworking. They call themselves Communist, but take that with a grain of salt.

I'm trying to figure out about Korea. It's a place that's going to be very exciting soon, if it's not already starting. Nigeria, Kazakhstan.

Again, China. I'm looking for investments in China. China’s market is 40 percent below its all-time high. Japan is 50 percent below its all-time high. I'd much prefer China and Japan to, say, America and Germany. You know, these are markets that are near all-time highs. And I know that watching you guys, you know to buy low and sell high.

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Rogers:  "China’s market is 40 percent below its all-time high.

Japan is 50 percent below its all-time high. I'd much prefer China"

Okay.  But here's the China A-25 Index ... update / Last: 14.68, almost double the low of two years ago

M8NMEJ9.gif

I would not be surprised to see China back down to $12, & Maybe lower.

( 12/14.68 = 18% lower )

Why? Well, because of the chart, and things like falling Leading indicators in China

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Yang: China LEIs Falling 'Quite Sharply,' Inflation At A Major Turning Point

By FS Staff

Tian Yang, Variant Perception's Head of Research, recently covered their must-read Understanding Leading Economic Indicators report with FS Insider. Yang explains the three major categories that most economic data fall into, how leading economic indicators (LEIs) help identify high risk/reward trades, why most economic data in the news is lagging and not helpful for investors and, most importantly, the message coming from LEIs currently on China, Europe, Canada, and the US, especially when it comes to the outlook for inflation.

Here's a clip of what he had to say on China's LEIs, which he said are now falling "quite sharply":

Focus on Leading Economic Indicators

Variant Perception's leading economic indicator framework helps to solve the problems of out-of-date or yet-to-be revised data, including GDP and inflation data, said Yang. There also tends to be too much averaging of market performance, Yang stated, and analysis based on this technique ultimately ends up producing regression models. These tend to produce results that are more accurate on average, but miss the big turns in the market.

We want to find data that's leading, focus on turning points in the leading data, and also focus on the data that's minimally revised or not revise at all. What we've found is the sweet spot tends to be around 6- to 12-month leads, and we're specifically looking for stuff that has a lead in that period. … The key is capturing the really big turning point moves. And I think that's where the leading indicators will add a lot of value."

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CHINA LAGS
From near the 2009 LOW in US stocks, China's Shanghai composite has lagged by a lot

ShComp vs SPX ... fr. 2/1/2009 :

L66C1NU.gif

Lines added

Z868dxt.gif

==

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SOXX dropped. market dropped.  Why?

Trump's threat of big trade sanctions on China.  China stocks got dumped Monday too

NEWS:

+ Trump vows to hike US tariffs on $200B of Chinese goods

This week, & may target hundreds of billions more soon. China considers cancelling this week's talks

+ China gives modest boost economy with RRR cut

China will cut Reserve Requirement Ratios, to release about 280 Bn Yuan ($41 bn) for small & middle-sized banks.

Funds will be used for loans to small & middle-sized companies. PBOC has cut RRR's five times in the last year.

+ Junk bond market rally turns Chinese borrowers more aggressive

The market flood gates were re-opened this year - $40.1B raised so far in 2019, vs. $45.6B for all of 2018

 

ShComp. / Shanghai Composite Index ... update / 2,926

Jum3vFX.gif

WHAT IS AT STAKE in China - A good speech that get's into deeper strategic issues

Stephen K. Bannon's Keynote Address at the Western Petroleum Marketers Association

==

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TWO YEAR CYCLE : in EEM & ShComp

EEM is dominated by China stock risk (ShComp)

EEM - vs. FXI and Hk-HSI ... update : EEM-alone : FXI : HK-HSI : HK-10 : CN:ShComp :

EEM-etc_zpshafpnrny.gif

UPDATING the Chart above ... update :

d5rCLWY.gif

ShComp / Shanghai Composite ... All Data : 5yr : / Last: 2,926

vppFHXV.gif

==

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Trump Winning? US Trade Gap With China Tumbles To 5-Year Low

Overall exports increased 1% to $212 billion, boosted by a 39% jump in soybean shipments. Imports climbed 1.1% to $262 billion on gains in oil, food, vehicles and pharmaceuticals. The overall merchandise-trade deficit widened 0.7% to $72.4 billion.

However, likely of more interest to President Trump, the trade gap with China shrank to $20.75 billion in March - the lowest since March 2014, offering the administration a chance to claim his tariff war is yielding the desired results just as negotiations reach a critical stage.

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... BUT may/will Rally, if China news is positive

Dow Drops Over 1000 Points From Highs As Yield Curve Inverts

The Dow is down over 1100 points from its highs in April...

For the first time since Jan 23rd, the S&P 500 has broken back below its key 50-day moving-average to six-week lows as trade deal anxiety takes hold...

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