Category: China & HK

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China, Hong Kong continue down-trend

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.

Dow Jones Shanghai Index

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*.

Shanghai Composite Index

* 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*.

Hang Seng Index

* Target calculation: 17500 – ( 19000 – 17500 ) = 16000

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S&P warns on Chinese property – macrobusiness.com.au

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.

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Iron forward market softens – Phat Dragon | Westpac

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

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China’s Big Four banks reportedly see big outflows – 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.

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China to ‘liquidate’ US Treasuries, not dollars – Ambrose Evans-Pritchard

A key rate setter-for China’s central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.

“The incremental parts of our of our foreign reserve holdings should be invested in physical assets,” said Li Daokui at the World Economic Forum in the very rainy city of Dalian….”We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way.”

via China to ‘liquidate’ US Treasuries, not dollars – Telegraph Blogs.

Why would a poor country with GDP per capita of $4000 and an emerging economy be investing in US Treasurys or blue chip stocks? Perhaps because repatriating funds would cause the yuan to rise to a more realistic level against the dollar and end China’s trade advantage.

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HongKong sell-off accelerates

Dow Jones HongKong Index reversed below 400, warning of another down-swing. The secondary trendline and declining 63-day Momentum indicate that the sell-off is accelerating.

Dow Jones HongKong Index

* Target calculation: 400 – ( 450 – 400 ) = 350

Weekly chart of the Shanghai Composite Index shows a primary down-swing to test support at 2300*. Reversal of 13-week Twiggs Money Flow below zero would warn of rising selling pressure. Failure of support would test the 2008 low of 1700.

Shanghai Composite Index

* Target calculation: 2650 – ( 3000 – 2650 ) = 2300

The sell-off in Asian markets will impact on others with a strong mining sector: Australia, Brazil, South Africa and Canada.

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Europe Is Urged to Take Bolder Action on Debt – NYTimes.com

“China is a poor country with only $4,000 per capita income,” Yu Yongding, a Chinese top economist and former member of the central bank’s monetary policy committee said in an interview in China. “To talk and think about China to rescue countries with $40,000 per capita incomes is ridiculous.”

China is ready to help, Mr. Yu said, “but European countries first should show that they have a clear road map and convincing policies to preserve the euro and solve their problems as well as the political will to make necessary sacrifices.”

via Europe Is Urged to Take Bolder Action on Debt – NYTimes.com.

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