If you were Chinese....

...would you expect either of these to stop here?

USD/CNH weekly:



EUR/CNH daily:



...yeah, me neither.  It seems reasonable to expect capital flight to continue.
Previous
Next Post »

32 comments

Click here for comments
Anonymous
admin
August 11, 2015 at 5:29 PM ×

http://www.wsj.com/articles/chinas-yuan-move-sets-up-showdown-with-traders-1439304288

"In its statement, the People’s Bank of China said it would let markets play a greater role in setting the currency. The first test of that will come Wednesday morning at 9:30 a.m. in Beijing when it sets the daily fix. If the central bank follows the market, the currency could fall another 2%. Bets on the yuan in the options markets signaled investors rising expectations for a weaker and more volatile yuan in the coming weeks. "

Reply
avatar
Mr. T
admin
August 11, 2015 at 6:18 PM ×

For all the talk of slow markets and hammocks there sure is a lot going on.

Reply
avatar
Anonymous
admin
August 11, 2015 at 7:10 PM ×

I like it, let markets play a greater role when you know markets will push hard in the direction you want.

Reply
avatar
Anonymous
admin
August 11, 2015 at 8:19 PM ×

Looks like that Apply and Dax call was right.

If CHN keeps going...

Reply
avatar
Anonymous
admin
August 11, 2015 at 9:12 PM ×

Saxo Bank called for a 20 percent devaluation at the beginning of 2015.

Reply
avatar
Antipodean
admin
August 11, 2015 at 11:04 PM ×

Sure is an interesting one. They just sent a pretty strong signal, even stronger if you believe that these guys arent silly, knew exactly the implications of doing it and did it anyway (I dont buy the idea that this helps SDR inclusion). Its pretty tough to stomach the IB write ups at the moment... reminds me of some of the commentary in the early days of the subprime crisis i.e. missing the wood for the trees

Impact on US rates prob the most interesting for me near term. sep off the table? FX reserve liquiditation? might not be too bad for equities in the end... Certainly open to hearing any thoughts

Reply
avatar
Anonymous
admin
August 11, 2015 at 11:51 PM ×

BRICS bar india in the shitter. MENA in the shitter with oil & war. Miners, CAD & AUS suffering due to commodities and EM slowdown. Greece. The whole cheap euro export expectations has unravel potential. Peripheral Europe on the up from a low base. US old school stocks in a bother, but we've got burger joints, iphones & social media.

Reply
avatar
Anonymous
admin
August 12, 2015 at 12:37 AM ×

If you were Chinese..you would buy gold!

Reply
avatar
Anonymous
admin
August 12, 2015 at 12:38 AM ×

http://dk.saxobank.com/Documents/Vilde-forudsigelser/OutrageousPredictions2015-eBook-TF.pdf

This is the prediction that Anon@9:12 refers to:

"With the Chinese domestic housing and credit bubble finally correcting, if not imploding, China will be looking for any way it can to ease the enormous deflationary pressures that characterise the downside of a credit cycle. Aggravating the pressure on China to act are almost three consecutive years of producer price deflation driven by massive overcapacity. A Chinese yuan at record highs (in inflation-adjusted terms) in this environment makes no sense, especially in light of its neighbour Japan’s simultaneous record low exchange rate (also in inflation-adjusted terms as of mid-November). So in 2015, China moves rapidly and persistently to devalue its currency over the course of the year, joining Japan and other countries in the global struggle to import inflation. This sets off a chain of Asian devaluations and the risk of hostile trade and financial sanctions with Japan."



This is the prediction that Anon@9:12 refers to:

Reply
avatar
Anonymous
admin
August 12, 2015 at 12:57 AM ×

Steen Jakobsen: Why you need to think again on China

https://www.tradingfloor.com/posts/jakobsen-why-you-need-to-think-again-on-china-5805708

Reply
avatar
August 12, 2015 at 5:02 AM ×

good www.metaldetectorindonesia.com

Reply
avatar
Anonymous
admin
August 12, 2015 at 5:07 AM ×

Can the Chinese move be viewed as similar to SNB removing peg before ecb QE. China sees FED moving soon so removes peg?

Reply
avatar
Anonymous
admin
August 12, 2015 at 6:14 AM ×

Thats what the squid is sayin

Reply
avatar
Anonymous
admin
August 12, 2015 at 6:41 AM ×

"China's currency fell further Wednesday following a surprise change in its exchange rate mechanism that rattled global markets and threatens to fan trade tensions with the United States and Europe. The central bank said the yuan's 1.9 percent devaluation Tuesday against the U.S. dollar, which was its biggest one-day fall in a decade, was due to changes aimed at making the tightly controlled currency more market-oriented. That raised the prospect of still more declines, which would help struggling Chinese exporters at the expense of foreign competitors and might shore up flagging economic growth.

On Wednesday, the yuan dropped another 1.6 percent."

http://www.nbcnews.com/business/business-news/china-currency-falls-2nd-day-after-surprise-devaluation-n408266

Reply
avatar
Nico G
admin
August 12, 2015 at 6:55 AM ×

if you were chinese you'd discreetly dump your trillions of UST whilst screwing your currency and fx convert when you ve found the CNY level you wanted (much lower)

talk about August black swan. how is your new long EU equity playing out LB? you should have stayed in ze hammock

Reply
avatar
Nico G
admin
August 12, 2015 at 7:02 AM ×

it is nice to see a true real new market situation for MM boyz to ponder and punt while distractions like FM 'i have nothing to say' can shut up for a while

Reply
avatar
Anonymous
admin
August 12, 2015 at 7:27 AM ×

How quickly will the herd shift? Or will there be another Bullard moment?

Reply
avatar
Nico G
admin
August 12, 2015 at 7:31 AM ×

the nightmare continues for high end real estate bubble spots that lost their Gulf and Russian buyers after oil/RUB took a hit (London), and their south American buyers after EM currencies crapped (Miami) but were still counting on Chinese buyers despise the crack down on corruption. Well China will just be making foreign real estate 2% dearer every day. With Chinese bid dissipating i might finally get Hawaii on the 'cheap'

the winners: the lucky few Chinese who already parked their cash abroad, following Russians. Greeks will keep on taking notice - bottom line being, you can never trust your government amid such acute currency war i.e. forex diversification today has never been more important. Congrats to the sell side desk who predicted much higher FX volatility for 2015 don't remember who it was but fortunes are to be made on forex

i plan to sell my VIX on spooz 2050 stop run

Reply
avatar
Gnome of Zurich
admin
August 12, 2015 at 8:07 AM ×

What about a 'if you were Swiss' edition? Or better a non-Swiss seeking a safe haven in CHF?

Reply
avatar
Anonymous
admin
August 12, 2015 at 8:09 AM ×

Any guesses re USDJPY ? Methinks we will see 130 pretty soon.

Reply
avatar
Anonymous
admin
August 12, 2015 at 10:11 AM ×

Seven days to bid the dax up 600 points. Day and a half to erase that. Doesn't sound like a strong bull market.

FM, you felt it running out of steam and I suggested shorting it. That was the top.

Waiting for ESX to give 3500 a proper run.

You gotta love low liquidity August when it gets going.

Reply
avatar
washedup
admin
August 12, 2015 at 12:23 PM ×

"the nightmare continues for high end real estate bubble spots that lost their Gulf and Russian buyers after oil/RUB took a hit (London), and their south American buyers after EM currencies crapped (Miami) but were still counting on Chinese buyers despise the crack down on corruption. Well China will just be making foreign real estate 2% dearer every day. With Chinese bid dissipating i might finally get Hawaii on the 'cheap'"

Sure nico - now they will be replaced by 25 yr old silicon valley 'entrepreneurs' who came up with a self esteem boosting app that whispers 'oooh, u so fine' which they sold to a private equity fund with a 7% IRR target for a BN.
More seriously, the misallocation of capital in the last few years has been colossal, but the bigger point is its there and still quite abundant. Any reason why you wouldn't expect american buyers to purchase property in Europe and Dubai, for example?

Reply
avatar
Leftback
admin
August 12, 2015 at 12:58 PM ×

This isn't a major cause for alarm as yet, not much buying of JPY. It would not be clever if you be long Asian equities, but we're not. It's not as though PBoC is going to do this every night for the rest of the year. Likely outcome of this week's dislocation is more dovishness from the BoJ. If there's one thing that was learned from the crisis of 2008 it is that allowing USD and JPY to firm up at the same time is a bad idea, with the yen carry unwind being, if anything, more dangerous. So, yes we may see USDJPY break out to new highs later this month align with a Silly Season rally.

For a trade, given that CNY devaluation may not be quite done, we'd be looking at long DAX, short Treasuries, maybe take another look at Aussie stocks for a few bargains? Just watching for the time being, and US equities remain fundamentally unappealing. AAPL in danger of filling that gap down to below 110.

Reply
avatar
Anonymous
admin
August 12, 2015 at 1:29 PM ×

Dudley to give a Bullard moment?

Reply
avatar
washedup
admin
August 12, 2015 at 1:53 PM ×

anon 1:29 - sure - spoos are down almost 15 points and horror of horrors, below the 150 day and almost flat for the year - the stench of human suffering is intolerable. Dudley is currently hastily editing his remarks to take out data dependency and throw in oblique QE4 references - his most recent google searches were for smily emoticons and .gifs of doves flying.

Reply
avatar
abee crombie
admin
August 12, 2015 at 2:30 PM ×

Nico, i am not sure what leads you to believe the bubble in high end real estate is over. Sure weaker currencies doenst bode well longer term, but on the ground it hasnt changed anything yet. Not saying it wont but perhaps you should talk to your local NYC or Maimi agent....

Dax is the whipping boy here considering the amount of China trade with Germany but its probably the bulk commodity guys who should be most worried, not the higher end exports of zee germans.. yet AUD and CAD have already reversed losses so I am a little lost.

Stay short Dax at your own caution, I dont want to be short when the end of year flows show up

Reply
avatar
Carry trader
admin
August 12, 2015 at 3:23 PM ×

Marking reaction to the 2% move is pure sentiment as you would expect during the summer lull.


Interesting to see if this might be positive for Chinese growth of if the trend continues. Not so positive on rebalancing the economy.

Agree theres value in Australia. Just stay away from thr banks. Miners taken out to the woodshed. Price action in glencore shows balance sheet still king.

Reply
avatar
Nico G
admin
August 12, 2015 at 7:44 PM ×

Abee washed-up to be honest i do not know much about real estate but sentiment extremes - on the euphoria side - are quite similar to stock markets . In 2006 going out in Miami all you could hear from yes, taxi drivers, club bouncers etc was the millions they made flipping condos, that prices would never go down because of land being limited and demographics and stuff all the while you could read that folks were 'renting' good credit to get access to mortgage. Wtf.

I lived in Dubai in 2007 when prices shot out of control. By June 2008 Dubai prices were like Paris. A yankee friend, very bright investor who moved from NY to work for Dubai holdings bought that month and i told her she was crazy. At the very top. It corrected 50% as Gulf real estate followed oil. I do not follow real estate there anymore but back then when you saw the utter shit quality that Emaar was building and marketing at $$$$ for Indian Chinese South african families... come on there has to be a repricing down the road

Last year in London it felt a bit the same - the motto that London house prices would never go down with so many looking to park cash away from their 'difficult' homelands etc sounded familiar. They might be right yet i felt uneasy with the whole thing and we sold our place with no regret. Now i will patiently wait for some 'liquidation' time is the essence if you believe that a next financial crisis is looming and real estate is not a market where one should ever lift an offer

now let me select all those juicy sandwiches images again. i am not a robot

Reply
avatar
hipper
admin
August 12, 2015 at 7:46 PM ×

It's reverting
a bit now... the fact that PBOC is trying to intervene to also slow down the decline at least suggests the possibility as plausible that it might not in fact be a beginning of a deliberate "strategic currency war" as the consensus majority seems to be suggesting, rather it's just because of still inexperienced and immature CB policy planning toddling along. And it's notable that nobody seems to believe in the Sep hike anymore either which is supposedly torpedoed under the waterline now, and it certainly shows in currencies. Here's an alternative theory on EURUSD though.

Perhaps a DAX relief tommorrow as the underlying reason somewhat reverting (so consequence should too), but at times it's possible that when something acts as a trigger it then ceases to be an underlying reason.

Reply
avatar
abee crombie
admin
August 12, 2015 at 9:55 PM ×

Nico, its much easier to look at the busts in Miami and Dubai than to look at the other cases in Sydney, Vancouver, London, NYC which have pretty much seen straight appreciation for the past 20 years, barring a few short corrections. I am not saying those places arent over-valued, just saying they have been expensive for a long, long time, so perhaps we need to analyze their prices within a different model.

HY is slowly drifting downwards, yet vix cant buy a bid. Something is amiss

MLP buyers on strike, HY closed for summer...Mr Equity market??

Reply
avatar
Nico G
admin
August 13, 2015 at 6:44 AM ×

Abee you are damm right on those locations - Sydney and Vancouver are the two most remarkable examples for there is no bullshit there just a sound play on quality of steady (Chinese!) immigration and more broadly the 5 star quality of life those two countries have to offer

mind you Canada this year has stopped granting residence rights to foreign real estate buyers so it might curb that growth one tad

New York and London are a different story, but relentless nevertheless: the story of big egos and single unit price records and rushed money by Kazakhs, Russians Chinese and Greeks (who were the first buyers in London last year, dig that) i.e. whoever does not trust their country and/or has made their money a little bit too fast (read: stolen)

New York is building those needle skyscrapers. A tale of greed and maximum return, they would build them 5 miles high if technology allowed so..

A townhouse in London was bought by a Chinese family for 20 million quid some years ago. Sold the the daughter of the former prime minister of Ukraine (oh really?) for 50 millions some years later. Now on sale for 85 millions. You get the drift? I think London has gone completely insane but a fabulous playground if you have the know how to refurbish prime old stuff and sell it to the new riches.

The only way you can splash such insane money on RE is when you know you got far too lucky making it

Reply
avatar
Marian Law
admin
August 26, 2015 at 2:34 PM × This comment has been removed by a blog administrator.
avatar