The Hang Seng index is falling steeply, with 13-week Twiggs Money Flow below zero warning of selling pressure. Target for the current-down-swing is 16000*.
* Target calculation: 19 – ( 22 – 19 ) = 16
The Shanghai Exchange is closed for Chung Yeung Festival, but the Shanghai Composite Index was testing support at 2350 on Friday. Failure of support would offer a long-term target of 1800*.
* Target calculation: 2400 – ( 3000 – 2400 ) = 1800
Since 2000, China has actively courted Africa’s unstable and dictatorial countries with offers of aid and a refusal to back United Nations sanctions against them. Indeed, China has blithely entered into business with African countries that Europe and America refuse to engage with, owing to sanctions.
…..China has chosen a high-risk path – ignoring human rights and violating UN sanctions – to secure the energy and other resources needed to sustain its economy’s rapid growth. It is a choice that neither befits one of the permanent members of the Security Council, nor demonstrates China’s readiness to be a responsible stakeholder in the international community.
China’s willingness to arm and defend African dictators, even in the teeth of UN sanctions, as in Libya, undermines its claim to a “peaceful rise.” Given China’s Libyan duplicity, the world should now determine whether it is a country that obeys international rules only when doing so suits its interests.
via China’s African Mischief – Yuriko Koike – Project Syndicate.
Credit markets are also now showing distrust in Chinese banks. Credit default swaps spreads for Bank of China and China Development Bank have surged according to Société Générale, and they are rising at much faster rates than the rest of Asia ex. Japan
via CDS signaling trouble for Chinese banks – macrobusiness.com.au | macrobusiness.com.au.
Dow Jones Shanghai Index continued a down-swing Wednesday to test the lower border of its downward trend channel. 21-Day Twiggs Money Flow declining below zero warns of strong selling pressure.
The Shanghai Composite index is headed for support at its target of 2350. 63-Day Twiggs Momentum declining below zero reminds that we are in a primary down-trend. Expect some retracement or consolidation at support. Failure would warn of a decline to 2000*.
* Target calculation: 2350 – ( 2700 – 2350 ) = 2000
Hang Seng Index found resistance at 18000 on Wednesday after rallying earlier in the week. The primary trend is down and 13-week Twiggs Money Flow (below zero) warns of selling pressure. Resistance at 19000 is expected to hold, followed by down-swing to 16000*.
* Target calculation: 17500 – ( 19000 – 17500 ) = 16000
Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said.
A 30 percent decline in sales may leave many developers facing a liquidity squeeze, S&P said after conducting stress tests of the nation’s real estate companies…..
“The worst isn’t over for China’s real estate developers,” S&P analysts led by Frank Lu wrote in a report today. “Developers are bracing themselves for slower sales and lower property prices ahead.”
via S&P warns on Chinese property – macrobusiness.com.au | macrobusiness.com.au.
The iron ore market is beginning to exhibit some signs of modest
unease, with 3mth forwards giving up significant ground while spot
has moved about 5% lower. From an export profitability perspective,
falls in the Australian dollar and Brazilian real have more than
covered the US dollar spot decline. Even so, to Phat Dragon’s eye
a cyclical correction in the ferrous metals sphere appears to be
underway and price expectations should be ratcheting downwards.
Excerpt from Westpac’s Phat Dragon weekly chronicle of the Chinese economy
HSBC’s preliminary China Manufacturing Purchasing Managers’ Index, or “flash” PMI, fell to a two-month low in September, indicating a broadening slowdown in the Chinese economy, with industrial output swinging from a modest expansion to a deterioration.
via China manufacturing data paint weak picture – Economic Report – MarketWatch.
China’s four biggest banks are seeing a big outflow of deposits…….. a large portion of the CNY420 billion of deposits may have flowed to the high-yielding private lending markets, which have grown rapidly in recent months due to the strong borrowing demand from small businesses…….Borrowing rates in the private lending markets are typically 10 times the benchmark deposit rates, the report said. China’s one-year benchmark deposit rate stands at 3.5% now.
via China’s Big Four banks reportedly see big outflows – MarketWatch.
…A sign that monetary tightening is starting to bite.
China’s refusal to open its economy to foreign investment could backfire by encouraging European politicians to curb Chinese investments on the continent, the European Union’s trade chief has warned.
In short, the West must stimulate with a credible longer term deficit reduction plan, the East must dump its mercantilism and banks must be reigned in everywhere. All eminently sane — and the opposite of what’s happening.
