China’s landing gets bumpy

Cross-posted from Investing in Chinese Stocks.

Chinese currency traders viewed the first day of trading in the Year of the Goat as ominous, as the renminbi barely moved on Thursday, effectively a dead market. The lack of activity comes as the yuan is sitting on the edge of the daily trading band. Unable to trade the yuan lower, the currency has become fixed again. The peg is here again. iFeng: 人民币再趋跌停 交易员:这个市场死掉了 不会动了:

Reuters quoted a trader saying, this market is dead, it doesn’t move.

Another trader at a large Chinese bank feels the same: “Hey, everyday a fixed exchange rate, saves me effort.”

Other traders see the yuan as being weak against the dollar due to U.S. dollar strength, not yuan weakness. Which is partially the case, but what if the U.S. dollar bull market is only beginning? Yuan Within 0.03% of Weak End of Band Amid Easing Speculation:

The yuan was little changed from Wednesday to close at 6.2589 a dollar, China Foreign Exchange Trade System prices show. The gap with the central bank’s reference rate of 6.1379 was 1.97 percent at the close, after earlier widening to 1.9958 percent, near the 2 percent limit.

“It seems that they are leaning toward a weaker yuan but they are doing it very, very slowly and very gradually,” said Eddie Cheung, a foreign-exchange strategist at Standard Chartered Plc in Hong Kong, referring to the PBOC. “There’s probably going to be some mild intervention just to make sure we don’t hit that top band.”

Spooked by Yuan Drop: China’s Megarich

Because of the extreme concentration of money at the apex of Chinese society, national stability rests to an extraordinary extent in the hands of just two million or so families. They are the top 1% of urban households, and already, their confidence in China’s future under President Xi Jinping is shaky.

Many are fleeing with their cash–not all of it, but enough to bid up prices of luxury real estate from Mayfair to Manhattan to Mission Bay, a waterfront neighborhood of Auckland, New Zealand.

Financial authorities are trying to ensure that the remainder doesn’t disappear across the borders. A potential trigger for a disorderly exodus of capital, one that could threaten the entire fragile financial system, would be a precipitous decline in the value of the Chinese currency.

That’s one reason—an important one—why a sharp yuan drop is unlikely, even though a slowing economy is increasing domestic pressure on the government to let the yuan fall in a bid to boost exports.

Meanwhile, in the economy, there are still signs of lingering weakness, Macau casinos hit lunar new year cold streak:

Barclays estimates that average daily table revenues in Macau were HK$510.5m (US$66m) for the week to February 23, a period including five days in the holiday period, compared with HK$541m the week before. Phoebe Tse, the bank’s gaming analyst, said the figures were “much weaker than we had anticipated”.

…Shares in Wynn Macau and Melco Crown Entertainment sank almost 6 per cent on Wednesday, while Sands China fell 5.6 per cent and Galaxy Entertainment Group shed 4.9 per cent.
The stocks tumbled as much as 8 per cent during the trading session, which saw Hong Kong’s Hang Seng index finish with a gain of 0.1 per cent. Many gaming companies have seen their share prices fall as much as 50 per cent over the past 12 months as the troubles facing the sector have mounted.

Even the Cambodian casino stocks are selling off though, Beijing’s glare deepens crisis in Macau:

During a recent visit to four of the city’s glitziest casinos, VIP rooms were mostly desolate, with some shuttered and one boarded up, their tables covered with wood and white cloth.

At nearby pawn shops and jewellers, used by many gamblers to evade China’s strict currency controls, and at money remittance agents in the Chinese border city of Zhuhai, there are fewer customers about.

In February last year, operators of the Chinese-controlled enclave’s 35 casinos were riding high, their revenues for the month up 40 percent year on year. This year, February revenues are expected to fall 40 percent, having fallen in each of the previous eight months, too.

And authorities stand ready to act on the still struggling property market. Developer sales in January were weak and Spring Festival has shut the industry down in February,【晚报】中国已做好支持楼市政策储备 春节楼市暂休眠:

Shanghai Real Estate Institute released a “typical January 2015 Housing Enterprise Report” shows that in January 2015, including Vanke, Hengda, Poly, the sea, green, Wanda, Country Garden, Shimao, Greentown and financial record, including the top ten housing prices transaction area, the average turnover and turnover performance are unsatisfactory. Among them, the sales amounted to 52.52 billion yuan, a decline of 58.4% mom, down 5% yoy; the average transaction price of 11,727 yuan / square meter, a decline of 15% mom, down 5.3% yoy; closing an area of ​​4.48 million square meters, a decline of 51.1% mom, an increase of 0.3% yoy.

China eyeing measures to ease housing slump

China is preparing measures to counter a housing market slump and will roll them out if the economy needs support, people with knowledge of the matter said.
The government could reduce down-payment requirements for second homes, the people said, declining to be identified as the information is not public. Another step could be letting homeowners sell properties without paying sales tax after two years, down from five years, they added.

…“The government is quite concerned,” Citigroup Inc Hong Kong senior China economist Ding Shuang (丁爽) said by telephone.
While the manufacturing data “shows some rebound, the overall economic downturn is not arrested. The government will carefully monitor the economic data and react,” Ding said.

Implementation of the easing policies would depend on whether an economic downturn continues or worsens, the people said.