Category: China & HK

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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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China’s Lessons From Mexico and Japan – WSJ.com

China might have more to worry about. Wages in the low-skill manufacturing sector are rising fast. On their current trajectory, they will double in the next five years. Low-skill jobs have already started to migrate elsewhere and will continue to do so. Public spending on education, at 3% of GDP in 2009, compares unfavorably to an average of 5% in the grouping of upper-middle-income countries to which China aspires. Reform of the financial system has fallen by the wayside as banks continue to funnel savings to low-yielding state-sponsored projects.

via Heard on the Street: China’s Lessons From Mexico and Japan – WSJ.com.

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Shanghai confirms bear market

Dow Jones Shanghai Index breached support at 320, confirming the earlier signal at failure of 330. Reversal of  13-week Twiggs Money Flow below zero warns of rising selling pressure.

Dow Jones Shanghai Index

* Target calculation: 330 – ( 390 – 330 ) = 270

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China’s Low-Wage Export Engine Starts to Sputter – China Real Time Report – WSJ

UBS Economist Jonathan Anderson: Beijing has relied on super-low wages to win a bigger slice of global exports…….But for the past 24 months….China’s share of low-end light manufacturing imports into the U.S. and European Union “has peaked” at around 50% of those markets. In the U.S. market, Vietnam, Bangladesh, Indonesia and Mexico are picking up market share at China’s expense. In the EU, it’s those Asian nations along with Poland, the Czech Republic and Hungary.

via China’s Low-Wage Export Engine Starts to Sputter – China Real Time Report – WSJ.

Look for growth in these markets: Vietnam, Bangladesh(?), Indonesia, Mexico, Poland, the Czech Republic and Hungary.

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Chinese manufacturing index rises but export outlook dips | The Australian

Exports were a problem area during the month, as the official survey’s new export orders subindex fell to 48.3 from 50.4 in July, slipping into contractionary territory for the first time since April 2009.

Economists said the weak exports reading could be an ominous sign for the export-dependent economy.

“It is a sign that China was affected by turbulent global markets in August,” said Standard Chartered economist Li Wei.

via Chinese manufacturing index rises but export outlook dips | The Australian.

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Shanghai Composite confirms down-trend

The Shanghai Composite Index respected resistance at 2650, confirming the primary down-trend. Expect a test of 2350. 13-Week Twiggs Money Flow reversal below zero would warn of rising selling pressure. In the long term, failure of support at 2350 would offer a target of 1600*.

Shanghai Composite Index

* Target calculation: 2400 – ( 3200 – 2400 ) = 1600

Monday’s long tail on the Hang Seng Index and higher volume indicate short-term support at 19000. Expect a rally to test the recent high at 20500.

Hang Seng Index

* Target calculation: 19000 – ( 22000 – 19000 ) = 16000

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China commits to down-trend

The Dow Jones Shanghai Index reversed below primary support at 328, confirming the primary down-trend signal from the Shanghai Composite Index. The 21-day Momentum peak barely above zero strengthens the bear signal.

Dow Jones Shanghai Index

* Target calculation: 330 – ( 360 – 330 ) = 300

Dow Jones HongKong Index broke short-term support at 415, indicating a down-swing to its 2010 low at 365. The longer-term 63-day Momentum below zero strengthens the bear signal.

Dow Jones HongKong Index

* Target calculation: 415 – ( 445 – 415 ) = 385

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