CHINA IN FOCUS : A BLAST THAT WILL LEAVE NO ONE STANDING
What a week for China starting with 3 days of continuous devaluations to end with a chemical blast in Tianjin port, the 10th largest in the world, that last left many dead or missing.
The dismay which the markets have received the devaluations are contrasted by the encouragement out of the rating agencies and regulatory agencies.
China’s new exchange rate regime makes good economic sense and is not the start of a currency war : S&P
IMF : Welcomes China’s Move to Greater Yuan Rate Flexibility
Yuan move probably appropriate if China slowing: Fed’s Dudley
We know who is hit most…..
“There has been a veritable explosion in the number of private investment funds (including private equity, and venture capital) in China over the last few months. The total number of funds was 12,285 as of June 1st, a massive increase from 7,989 three months before, based on data from China’s securities regulator. Also of note, assets under management were up by a solid $75 billion to $433 billion, a six fold increase.” http://www.valuewalk.com/2015/06/hedge-funds-china/
This includes the 4000 new hedge funds set up 3 months into June 2015 and we are not sure if they are all hedged for currency.
6 month return on SHCOMP +22.13%
3 month return on SHCOMP – 7.97%
6 month return on CNY -2.36%
3 month return on CNY -2.97%
The Great China Deval dragged everything down with her from commodities to EM currencies to most equities (except the US) and touched a raw nerve in what we have come to believe as the unassailable CNH bond market which froze in its tracks, bereft of prices as clients scamper to exit and were unable to for lack of prices and market liquidity.
It is still early days yet to ascertain the repercussions of the Great Deval on markets and into the anticipated Fed hike next month and talk of Congress taking action next month to revive debate on “legislation that would punish countries for deliberately undervaluing their currency to make their products cheaper in the United States.”http://thehill.com/policy/finance/251189-congress-takes-aim-at-china-on-currency
No doubt we will be hearing more about it at the Jackson Hole symposium this month end (27-29 Aug) and I think it is best to sweep things under the carpet and go with the idea that it is all for the greater good than to illicit more financially disadvantageous panic even as heads will roll in a couple of weeks as we discover the corpses of those hit hard by this week’s events.
I was waiting for that quick buck like everyone else but now caught in for the longer haul ?
Kudos to China for their brilliant move in the game of Go or weiqi that leaves everyone on the same page.
Leaving with the indicative prices….
