RBC thinks so: I Further build the case for a tactical factor-reversal trade (1-3 month scope), where on account of a number of ‘higher rates’ macro catalysts and quant seasonality trends, I see scope for ‘Value’ and ‘Size’ to reverse their recent underperformance relative to ‘Anti-Beta,’ ‘Growth’ and ‘Momentum.’ The latest data-point strengthening my view
Via Caixin: (Beijing) — China’s banking regulator has recently asked lenders to assess their credit-risk exposure to companies active in overseas acquisitions, sources close to the regulator told Caixin, as the country continues to curb a shopping spree that led to a record capital exodus last year. The China Banking Regulatory Commission said the risk
Via Capital Economics: Capital outflows from China were broadly unchanged last month and are likely to persist at this relatively low level for the foreseeable future as households and firms increase their exposure to foreign assets. But unless sentiment on the renminbi turns significantly more negative again, outflow pressure should remain manageable. China’s
From Credit Suisse: ■ Growth vs reform: The current waxing and waning of Chinese policy occurs as the authorities try to ensure economic stability while they undertake the very large task of economic reform. Over the last few months reform was “winning” with an effort to reduce some of the excesses in the financial system
It’s an unusual house price cycle in China but it is following the script in slow motion. May house prices rose 0.7% across the 70 city index and annual growth fell to 10.4%: It is an increasingly bifurcated market with top tiers now flat or falling and lower tiers still growing: The net number of
Cross-posted from Investing in Chinese Stocks. According to CASS data: The median price of the above cities (Beijing, Shanghai, Guangzhuo) in May were 61685 yuan per square meter, 54458 yuan, 22,273 yuan, respectively, compared with April decreased by 3.2%, 0.4%, 0.5%. Another first-tier cities in Shenzhen, the median price of 50423 yuan per square meter,
From Kyle Bass today via Reuters: Hayman Capital Management founder Kyle Bass on Thursday said he remains short the Chinese yuan despite the country’s latest change to the guidance rate, because he believes credit bubble problems are “metastasizing.” “What the public narrative is and what they have been doing behind the scenes are two completely
From Goldman today: China: Q&A on money and rates Q1. Didn’t the PBOC suggest that its interest rate policy was partly tied to the Fed policy? Yes, but it does not have to be. The PBOC did not raise rates on open market operations (OMOs) today (and also kept 7-day repo rate fixing broadly stable
China released May credit overnight and the numbers continue the trend of steady slowing. New bank loans cam in a 1.11tr yuan while total social financing was lower at 1.06tr yuan: In short, shadow credit shrank as curbs bite: Total loans were still up 60% year on year for May: And the rolling annual is
China’s May data dump is out and is solid with a slow slowing developing. Headline numbers were roughly at consensus with industrial production stable 6.5%, fixed asset investment falling to 8.6% and retail sales stable at 10.7%: Most importantly for Australia, real estate continues to slow. Sales growth eased again to 14.3%: I expect this
Credit stress is now very obvious in China. Interbank markets have all hit new yield highs in recent days: Even more revealing, the Chinese yield curve has fully inverted for the first time in modern history: An inverted yield curve is a classic recession indicator as short end tightening surpasses long term inflation expectations. We’ve seen
Above is an interesting segment on China’s debt time bomb, aired on ABC’s The Business last night, which also threatens the Australian economy. And to put China’s debt build-up into perspective, here’s a summary chart using data from the Bank for International Settlements: Note the explosion in Chinese non-financial sector debt over the past decade.
Bye bye Chinese inflation. The May CPI is in at 1.5% and PPI at 5.5%: Month on month was down 0.1 and 0.3 respectively. There’s no consumer inflation to speak of: And the ferrous bubble is collapsing: As China slows during H2, it’s back to deflation in short order.
Via the FT: Chinese corporate bond financing hit a record low in May, as a market rout discouraged new issuance while a wave of previously issued notes came due. The combination of tight liquidity and a regulatory crackdown on leveraged investment in bonds has hammered China’s debt market in recent months. Net corporate bond financing
China’s May trade is out with exports up 8.7% and imports 14.8%. The trade surplus came in at $40.8b: Iron ore imports were strong at 91.5mt: And steel exports were also up at 6.98mt though down 23% year on year: A solid month. Slowing ahead.
Via Capital Economics: The latest rise in China’s foreign exchange reserves suggests that the People’s Bank (PBOC) became net buyer of FX for the first time in well over a year last month. This reflects an easing of capital outflows, which has allowed the PBOC to pare back support for the renminbi. The
From the always excellent Vimal Gor today: Another fake break? This month President Trump faced increasing political problems, President Temer was swept up in another Brazilian corruption saga, North Korea lobbed more missiles in their relentless ‘testing’, and China’s credit ratings were downgraded by Moody’s. After a solid start to the month, markets started to
From Investing in Chinese Stocks. Beijing has the tightest mortgage lending policies. The first-home interest rate is 1.1x benchmark. Some banks in Shanghai still offer 5% discounts, Shenzhen 3-5%, the four big banks in Guangzhou offer the benchmark rate. A second-home is 1.2x benchmark in Beijing, 1.1x in the rest of the first-tier. Beijing homebuyers
This just ain’t going away, via Caixin: China is stepping up supervision of the use of bank cards overseas, a move the foreign-exchange regulator says is needed to fight money laundering, terrorist financing and tax evasion. Starting from Sept. 1, banks will be required to report on a daily basis all cash withdrawals made via
Rehypothecation is a banking process that pledges a single asset against multiple borrowings. It is behind all of the great financial booms and busts of history. It was the heart of the US sub-prime bubble as worthless assets were pledged against enormous quantities of structured products. It is the heart of the Australian housing bubble in
Via Capital Economics: The outlook for China’s banks is going from bad to worse. Pressure on the banking system has increased during the past year even though economic activity has recovered. And with a renewed slowdown now on the cards, the health of China’s banks looks set to deteriorate further in the coming years. Chinese
Not happy: Operating conditions faced by Chinese goods producers deteriorated for the first time in nearly a year in May. The fall in the headline index coincided with slower increases in output and new orders, while staff numbers were cut at a quicker rate. Subdued demand conditions underpinned a renewed fall in purchasing activity, albeit
First, the non-manufacturing index registered 54.5, up from 54 in April: Sub-sectors, the service business activity index was 53.5% , higher than last month 0.9 percentage points, the service industry growth rate has accelerated. In the industry sector, the business activities index, such as retail trade, rail transport industry, air transport industry, postal service industry,
It ain’t over ’til it’s over. China’s steel PMI is out today and printed big at 54.8 with new orders ripping higher to 60.5 from 46.9 last month. Output was also thumping along at 58.2 up 2 points: Dalian iron ore is still sagging but not on this data! Always bear in mind that this
From Citi: ‘China-dependence’ is not an EM-specific phenomenon, of course. The rise in the world economy’s dependence on China is captured in Figure 1, which shows the relative contributions to global growth that come from China and the US. China contributed 43% of global GDP growth last year; the US, 17%. It has been almost
