China Focus : Playing Octopus
There is outflow from the Land of the Red Dragon with their biggest capital account deficit since 1998 in the final quarter of 2014.
And we had the RRR cut this week from 20% to 19.5%, as 30 out of 145 government-owned companies in China that have published earnings so far are expected to make a loss in 2014. Well, we have a lot of arrests these days, sparing any unrest as the PBoC mulls their options to address the capital shift. http://www.bloomberg.com/news/articles/2015-02-03/pboc-said-to-mull-policy-options-to-address-capital-flow-shifts
Moody’s noted that regional and local government revenue growth is slowing sharply, which is a credit negative and by now we can guess its all about real estate, isn’t it ? Yes, take it out on Kaisa and bite the hand that feeds but it is not really the local government’s fault because the corruption probe is from the top.
Kaisa managed to pull of an 11th hour 59 mins debt repayment, rewarding debt punters and ensnaring others to join the junk rally.
Troubles afoot for casinos now as the central government turns their attention to foreign casinos seeking Chinese gamblers. http://www.reuters.com/article/2015/02/06/china-gambling-idUSL4N0VG1QK20150206
And more bankers fall under the financial sector dragnet, this week we have a Bank of Beijing board member under scrutiny. http://www.businesstimes.com.sg/government-economy/china-broadens-graft-probe-into-financial-sector
They are also building another aircraft carrier that works and a nuclear power plant in Argentina while boosting military ties with Thailand and a trans-Pacific submarine cable linking up with the US.
Trying too hard to play octopus ?
The beauty of it is that China has registered a record trade surplus last month when the US recorded their worse trade deficit since Nov 2012 in Dec 2014.
Worthy of note. ….. “The decline in exports to Hong Kong may be partially attributed to the government’s crackdown on fake invoicing, used by companies to avoid limits on bringing foreign currency onshore”, an excuse that was used last year as well. http://www.bloomberg.com/news/articles/2015-02-08/china-posts-record-trade-surplus-as-imports-slump-on-oil-prices
The RRR cut did little for stock markets and we are heading into the pre lunar new year long week off so it is not time for heroics.
I have no interest in China for the moment.
Leaving with the indicative bond prices.