CHINA IN FOCUS : A RECIPE FOR MAYHEM

I think the Chinese are not talking much to each other this week.

Main headlines.

Reuters : China plans to cut number of big state firms (SOE’s) to 40 : state media. http://reut.rs/1zctks2

China SASAC says did not give interview to state media talking of plans to cut SOE count to 40. http://bit.ly/1Gxm8q9

$#%^@! !

PBOC to consider buying local govt bonds directly.

This QE story is mired in much uncertainty and it does not appear to be de facto QE more than it is substituting the outflows that the country is suffering from. http://www.economist.com/blogs/freeexchange/2015/04/chinas-monetary-policy

Meanwhile China continues to conquer more sea for themselves, add nuclear plants at record pace to fight smog, overtake US as the world’s largest mobile gaming market (which is also a cash transfer/payment business, as I just learnt), PetroChina profits falls to lowest on record and arrest their citizens in an overseas dragnet on corruption.

China accounted for 1/3 of the rise in global debt since 2007 !

We saw the first SOE default last week out of Baoding Tianwei Group which fortunately only affected the domestic market, but it shall not be the last at this rate.

And if my conspiracy theory has any bearing, the best (if not perfect) solution would be for China to pass this problem to the rest of the world ! Which is as easy as REMOVING THE CNY PEG, that will force global fund managers to reweight China in their portfolios and FORCED to buy up everything at bubblelicious prices. https://tradehaven.net/market/fx/we-love-conspiracies-china-peg-going-going-gone/

The IMF SDR ambitions will be fulfilled with the removal of the peg because China is too big to ignore for the IMF, now that they have the AIIB under their belt. http://in.reuters.com/article/2015/04/08/china-imf-sdr-idINKBN0MZ07N20150408

Like I said over a month back, China is preparing for something big and the pieces are starting to fall into place.

Rationally, and as a word of caution, I see this as a sign for the top for now. Not a good thing when expectations are built up on fluff and markets are rallying to insane altitudes on a faltering economy.

Thus the best strategy would probably be to stick to the currency for the time being, although I note that my conspiracy theory does not have the CNH-CNY spread difference to back it up.

It is pretty alarming that the government does not appear to be talking to each other which makes it tough on investors (a recipe for mayhem) and I have mostly stopped trying to follow market developments because I am not sure if anyone can claim to know what is happening and reading more only adds to the confusion.

Leaving with the indicative prices of a lot of bonds.

CNH BONDSCNH BONDS 2