China Focus : To Smote The Little Pearl Of The Orient

Not sure if anyone has noticed that the CNH/CNY spread is widest in 2 years. It has always been CNH the stronger and CNY tempering it’s strength but it is not since the Hong Kong protests started and now we are in the middle of the Golden Week and have not seen any fixings for the past 3 days.


I was so wrong when I thought no one was paying attention to the poor Hong Kong students last week.

But I guess I will be right because China is sticking to the “Talk To The Hand” stance with a Beijing official commenting that “The sun rises as usual” when asked about the peaceful demonstrations because the reality is that Hong Kong is inconsequential.

hk share of china gdpChart of HK’s contribution to China’s GDP over the years. 

And I will not be taking sides here because it is not allowed in this country as I hear that 6 Hong Kong citizens who rallied in Singapore were, errr, taken somewhere. But I buy all the conspiracy theories that I have read about the CIA funding the movement and also the power struggle in Beijing (

I predict it will end sooner than we think because China just told Europe and the US to mind their own business (and they have ISIS, Ebola  and Ukraine on their hands). And the Anonymous Hacker group targeting the HK government will soon be brought to justice because China just happens to be the place where 43% of major Internet Attack traffic comes from.

Who will dare stand up for Hong Kong ? Just go talk to the hand like I said last week.

Best not to mess with China, our conspiracy theory last week goes – Kim Jong Un is still noticeably missing.

So the foremost question on all investors minds is “Is it time to buy Hong Kong ?”

No doubt the answer was YES, YES,YES because the Hang Seng closed back above 23,000 today after a 2 day holiday to celebrate China’s national day. And with the Dow’s overnight rally, we are going to see a fierce gap up on Monday.

3 major developments in China.

1. Easing the mortgage lending rules for 2nd and 3rd homes !

2. China’s central administration will impose hard caps on local government borrowing.  New borrowing would need to be approved by the National People’s Congress, without providing specific figures for the quotas it will impose. The statement also pledged not to provide bailouts for local governments.

All these will not give us the GDP numbers of the past and are more like flood barriers to protect the property sector which accounts for 1/4 the Chinese economy and also debt control in response to the Geneva report that suggests a period of slow growth and mounting debt could trigger a crisis in China.

3. Chinese land sales plunges in 300 cities and PMI numbers are weak in general, with manufacturing looking slightly better (Sep Manufacturing PMI 51.1 vs 51.0 expected and Non Manufacturing PMI 54 vs previous month’s 54.4)

Measures aside, I believe that people around the world will sit up and look at China in different light. The Hong Kong situation only cementing  what we all know at the back of our minds – that China is a global power and soon to be, world leader.

Economists are mostly critical as China continues on their economic reforms without casualties behind their iron curtain. Economic reforms for an iron grip on power as we hardly hear of their president’s family assets after Bloomberg was punished for their exposé 2 years back.

My safe haven theory still holds because iron grip behind iron curtain means investors are safe.

And my personal opinion remains that China is a paradox which is unimportant because we are all starting to see what a farce the rest of the world is becoming.

China will be back on Wednesday, 8th October, the day of the full Blood/Harvest Moon eclipse and the second in the tetrad of 4, a pretty rare event. (Buyers of the Armageddon theory do not have to worry till Oct next year and for non believers of the theory

It will be a busy month as the world gets ready for the Shanghai-HK stock connect and monster Coco bond issues out of Chinese banks which we have been waiting for.

Will we see Shanghai Composite challenge its 2 year high  ? By then Hong Kong will be yesterday’s news.





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