It's Not Just China And Oil Anymore: Here Are The Two New Concerns Weighing On Risk

While the following summary of key recent headlines suggests a broad array of issues leading to the worst start of the year since 2008...

... in broad terms, the biggest worries challenging that bull case in January were twofold: China and commodities, mostly oil. However, over the past week, two new big concerns appear to have emerged. Here, ironically, is Deutsche Bank explaining what these are (for those confused, "tightening in financial conditions in European financial credit" is a euphemism for plunging DB stock among others):

The year continues to be bruising for risk assets and recent attempts at stabilisation have been unsuccessful. After a mild rebound, equities and US credit spreads are again close to their year’s worst levels.

In addition to the initial concerns about China and energy, two new issues further weigh on risk sentiment: the slowdown in US growth momentum and the tightening of financial conditions especially in European financial credit.

Macro data in the US have been weaker than expected and have raised questions about the sustainability of the recovery. Consumer spending and the services sector, which had been the drivers of growth, have decelerated. Fundamentals there still look sound, but weakness may persist and we have revised our below consensus growth forecasts further down. The Fed turned more dovish in response to the slower momentum and market volatility, and we no longer expect a rate rise in March. Indeed, at this stage it is difficult to see the Fed hiking more than once this year.

The Fed was not alone in this dovish turn. The Bank of Japan surprised markets by cutting rates into negative territory, and we actually expect a further cut later this year. As for the ECB, more easing should be forthcoming in March. A deposit rate cut seemed like the best course of action in response to purely external risks, but if the tightening of financial conditions does not subside an increase in the size of the QE purchase programme may be necessary.

Our macro outlook for 2016 is broadly unchanged so far, uninspiring but not a disaster – but downside risks have risen both in the US and in Europe. Meanwhile, the absence of new news has moved attention away from China, but the underlying problem remains unresolved. As for oil, volatility is becoming less relevant for macro and markets.

Despite this monetary policy support, until US growth, European financial conditions, China and oil concerns are put aside, markets will remain volatile and a sustained change in risk appetite is difficult. Fundamentally, we see 15-20% upside to equities, US credit spreads fairly priced and still believe in the stronger dollar story – but risks remain for all these views.Expectations for a drift higher in rates have not materialised, and dovish central banks and lingering macro concerns will continue to delay this normalisation.

And here is the matrix breaking down all the recent conditions weighing on risk. We wish we could be as optimistic as DB that monetary support from central banks which are now running on fumes in terms of credibility, and that oil, which continues to gyrate with grotesque daily volatility, are "supportive."

In fact, we are confused that DB is optimistic on central bank support: after all it was, drumroll, Deutsche Bank, which over the weekend warned against any more "easing" from central banks whose NIRP is now weighing on the German bank's profitability, something the market has clearly realized judging by the price of its public securities.

These Are The Top 20 Companies By Market Cap Over The Past Decade

There are many observations to be made about the dramatic shifts shown in the chart below which demonstrates the top 20 companies by market cap over the past decade, but what, to us, stands out the most are two things:

1. after a decade of being either the world's biggest or second largest market capitalized company, Exxon has tumbled to 5th spot, something it did not do even during the peak of the financial crisis; and
2. after five years of being in the top spot, it is time for someone to finally dethrone the world's most popular smartphone maker.

Probability of a range of interest rate outcomes based on Fed Fund future contract prices

The Pros and Cons of a Fed Rate Hike

Number crunching: The impact of China's currency devaluation

In mid-August, China shocked markets by devaluing the yuan.

Today's infographic looks at the impact this had on global currencies using three different time frames:
1 day, 1 week, and 1 month.

In the grand scheme of things, China’s mid-August currency devaluation spree was a drop in the bucket. Since the Financial Crisis, countries have routinely printed money, kept rates pegged artificially low, and found other ways to get temporary competitive advantages with cheaper currency.

While the People’s Bank of China has made some questionable interventions, China’s currency itself has been pegged to the US dollar officially or unofficially since its early history. With the US dollar climbing wildly against most global currencies since mid-2014, the yuan climbed along with it. China’s currency appreciated against all other major Asian currencies, which erased the country’s manufacturing cost advantage and trade surplus. In retrospect, it is almost surprising that they kept the reference rate where it was for this long.

The strong reaction from markets and media was more from the angle that even slightest movement made by China can create a ripple effect on fragile global markets. China, for a better lack of an analogy, is a bull in a china shop. Its economy and currency are seen as important bellwethers and when the PBOC makes an announcement, people listen.

That’s why in mid-summer, markets got volatile in a hurry. China devalued its currency by 1.9% on August 11 and made some smaller changes since then. The country also announced adjustments to how it would calculate its onshore reference rate moving forward.

Today’s infographic looks at the reaction in currency markets in three timeframes after the event: 24 hours, one week, and one month after.

Some currencies, like the euro, appreciated against the Chinese Renminbi right away and maintained that momentum. The euro went up 2.06% in the first day, and then continued to appreciate to 5.73% by the end of 30 days. Others swung back and forth wildly: at first the South African rand was up 0.71%, but then it ended as the biggest loser against the yuan at -4.24% over the course of a month.

Despite the mixed reaction from different currency markets, the reason China did this was clear. The country wanted to promote convergence in its onshore and offshore rates, and it has also been trying to woo the IMF for some time to be included in the IMF’s basket of reserve currencies called Special Drawing Rights. The latter move is a part of China’s posturing to eventually better internationalize the yuan.

As a side benefit of the devaluation, China also gets temporary relief in promoting exports at a cheaper price – though this will only last until the next country takes action in the game of currency war hot potato.

Original graphic by: Inovance

Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt

Earlier today, Macquarie released a must-read report titled "Further deterioration in China’s corporate debt coverage", in which the Australian bank looks at the Chinese corporate debt bubble (a topic familiar to our readers since 2012) however not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with "uncovered debt", or those which can't even cover a full year of interest expense with profit.

The report's centerprice chart is impressive. It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would write it, have an EBIT/Interest < 1.0x.

As Macquarie notes, looking at the entire universe of CNY22 trillion in corporate debt, the "percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample."

To be sure, both the size (the gargantuan CNY22 trillion) and the deteriorating quality (the surge in "uncovered debt" companies) of cash flows, was generally known.

What wasn't known were the specifics of just how severe this bubble deterioration was for the most critical for China, in the current deflationary bust, commodity sector.

We now know, and the answer is truly terrifying.

Macquarie lays it out in just three charts.

First, it shows the "debt-coverage" curve for commodity companies as of 2007. One will note that not only is there virtually no commodity sector debt to discuss, at not even CNY1 trillion in debt, but virtually every company could comfortably cover their interest expense with existing cash flow: only 4 companies - all in the cement sector - had "uncovered debt" 8 years ago.

Fast forward to 2013 when things get bad, as about a third of all corporations are now unable to cover their annual interest expense, even as the total addressable corporate debt has soared to CNY4 trillion for just the commodity sector.

And then in 2014, everything just falls apart. Quote Macquarie, "more than half of the cumulative debt in this sector was EBIT-uncovered in 2014, and all sub-sectors have their share in the uncovered part, particularly for base metals (the big gray bar on the right stands for Chalco), coal, and steel."

Compared with the situation in 2013, while almost all sub-sectors did worse in 2014, but things appear to have worsened faster for coal companies as more red bars have moved beyond the 100% critical level for EBIT-coverage.

It means that last year about CNY2 trillion in debt was in danger of imminent default.

The situation since than has dramatically deteriorated.

So are we now? Macquarie again: "Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime."

In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can't even generate the cash to pay down the interest on their debt, let alone fund repayments.

We fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.

What China Consumes -Graphic

Chinese Stocks Overtake US As Most Actively Traded Futures Contract In The World

Having lost its mantle as largest economy in the world to China... and world's biggest oil importer (again to China), 'exceptional' USA appears to have just lost its Number 1 status in financial market depth to China also...

China's Financial Futures Exchange CSI-300 futures contract has now traded more on average than the massively liquid S&P 500 e-mini contract for the last month...

Of course, with millions of new retail trading accounts every week in China, we suspect this 'false dawn' of activity will not be quite as exuberant as we have seen for 6 months.

GLOBAL ECONOMY-China factory activity disappoints again, hopes pinned on US and Europe

* Surveys show China PMI falls to 49.2 in April, Japan PMI at 49.7

* Asia still facing tough conditions, more China stimulus seen

* European and U.S. flash PMIs due later Thursday

(Reuters) - Manufacturing activity in Asia's top two economic powerhouses slowed further in April, a disappointing outcome that calls for yet more stimulus and puts pressure on the United States and Europe to do more of the heavy lifting to drive global growth.

 

The flash HSBC/Markit Purchasing Managers' Index (PMI) for China fell to a one-year low of 49.2, from 49.6, pushing deeper below the 50-point level that is supposed to separate growth from contraction.

 

"The worse-than-expected PMI suggests downside risks to China's 2015 growth outlook," analysts at Barclays wrote in a note to clients.

 

"We believe downside risks to growth and inflation are materialising given the disappointing Q1 growth rate, and maintain our below-consensus 6.8 percent growth forecast for 2015."

 

The soggy outcome illustrated why the People's Bank of China

 

(PBOC) on Sunday cut the amount of cash that banks must hold as reserves to help spur lending.

 

It slashed the reserve requirements by a bigger-than-expected 100 basis points (bps). 

 

"We continue to call for two more 50 bps reserve requirement ratio cuts and three more 25 bps benchmark rate cuts over the rest of the year," Nomura analysts said in a research report.

 

Hopes of yet more stimulus have helped sparked a massive rally in the local share market. The CSI300 index <.CSI300> of the largest listed companies in Shanghai and Shenzhen has risen over 30 percent so far this year.

 

It briefly scaled a fresh seven-year peak of 4,767.9 in the wake of the survey, but has since drifted off the high.

 

The report was not all bad with overseas demand picking up in April and new export work rising for the first time in three months.

 

A separate survey showed Japan's PMI slid to 49.7 from 50.3 in April as new orders continued to shrink and manufacturing production fell for the first time since July 2014.

 

Yet the rate of decline for production was only fractional and encouragingly employment returned to growth.

 

"Meanwhile, reports of a favourable yen/dollar rate continued to help improve price competitiveness, as companies noted a rise in new export orders for the tenth consecutive month," said Amy Brownbill, an economist at Markit.

 

The result is unlikely to drive the Bank of Japan (BOJ) into action. The BOJ has steadfastly maintained its outlook for a recovery that will keep the economy on track to hit the central bank's 2 percent inflation goal over time.

 

At next week's policy review, the BOJ is expected to hold off on expanding its already massive monetary stimulus but may lower its inflation forecasts.

 

All eyes are now on PMI surveys for the euro zone, with forecasts for the Markit's flash Eurozone Composite PMI centring on a more encouraging reading of 54.4, up from 54.0.

 

In the United States, the factory sector is expected to continue expanding in April, albeit at a slightly slower pace. The Markit's flash U.S. manufacturing PMI is seen at 55.5 versus 55.7 in March. 

Will Chinese RRR cuts lift Aluminium, Copper?

The People’s Bank of China (PBOC) will reserve requirement ratio (RRR) by one percentage point, the central bank announced on Sunday.

The monetary stimulus will boost aluminium market, but any price rally should be limited, given the poor market fundamentals, Guoxin Futures told SMM. Guoxin Futures added that power tariff cuts will weaken cost support for aluminium prices, another factor that will arrest sharp price gains.

The recent rise in aluminium prices was aided by China’s pro-growth policies and hopes for more stimulus measures, rather than an improvement of market fundamentals, Hongyuan Futures told SMM. The chronic overcapacity means that this round of RRR cuts will have limited impact on aluminium prices, Hongyuan Futures added. 

Analyst from Guosen Futures agreed with the opinion and told SMM in an interview that the RRR cut will help ease worries triggered by last week’s poor economic releases. “That plus the slower growth in copper inventories during a high demand season will send copper up to 44,500 yuan per tonne, probably heading towards 46,000 yuan.”

“The monetary easing will definitely benefit copper market, and we now see copper to climb to 45,000 yuan per tonne,” chief analyst from COFCO Futures predicts.

However, analyst from Western Futures warned that the easing measures were also a reflection of fragile economy in China. Besides, it may take some time for these measures to produce results. “Thus, we expect copper to meet resistance at 45,000 yuan per tonne.”

China Trade Surplus Crashes As Exports & Imports Collapse In March

Forget the weather, it must be the smog. China just announced total carnage in its trade data for March:

• CHINA'S MARCH IMPORTS FALL 12.3% Y/Y IN YUAN TERMS; EST. -11.3%
• CHINA'S MARCH EXPORTS FALL 14.6% Y/Y IN YUAN TERMS; EST. +8.2%
• CHINA'S MARCH TRADE SURPLUS 18.16 BILLION YUAN; EST 250B YUAN

So what exactly was the Chinese stock market 'discounting'?

Trade Surplus collapses... (economists knew about year-end and forecast +250bn!!!)

As Exports crash and Imports continues to slide for the 5th month...

In US Dollars the picture is worse...

• *CHINA'S MARCH EXPORTS FALL 15.0% FROM YEAR EARLIER
• *CHINA'S MARCH IMPORTS FALL 12.7% FROM YEAR EARLIER
• *CHINA'S MARCH TRADE SURPLUS $3.08 BILLION

While year-end shenanigans will likely be blamed (and sure enough...)

• *CHINA 1Q TRADE VOLATILITY MAINLY DUE TO SPRING FESTIVAL: HUANG
• *UNCERTAINTIES EXIST IN CHINA'S 2Q EXPORTS MOMENTUM: HUANG

Which is odd that all the data massively missed expectations which we assume Economists were aware of the calendar?

We suspect - given the weakness in other recent data - that this clarifies the fact that Beijing will have to devalue and fast. Their economy is crashing...

Which means Moar QE... Which means stocks limit up?

Chinese Economy "A Lot Worse Than You Think," Bloomberg Says

Meanwhile, in China, things are “a lot worse than you think,” says Bloomberg metals analyst Kenneth Hoffman who recently visited the country to assess the outlook for metals demand. This doesn’t exactly come as a surprise. Falling demand from China has been a major factor in the collapse of iron ore prices which just today caused Australia’s fourth largest miner to suspend production altogether and which last month prompted Fortescue Chairman “Twiggy” Forrest to break out the old “let’s start a cartel” suggestion when discussing how to firm up prices. To let Bloomberg tell it, demand from China for the steelmaking ingredient won’t be picking up anytime soon:

China’s steel and metals markets, a barometer of the world’s second-biggest economy, are “a lot worse than you think,” according to a Bloomberg Intelligence analyst who just completed a tour of the country.

What he saw: idle cranes, empty construction sites and half-finished, abandoned buildings in several cities. Conversations with executives reinforced the “gloomy” outlook.

“China’s metals demand is plummeting,” wrote Kenneth Hoffman, the metals analyst who spent a week traveling across the country, meeting with executives, traders, industry groups and analysts. “Demand is rapidly deteriorating as the government slows its infrastructure building and transforms into a consumer economy.”

Prices for commodities from iron ore to coal are sinking as China’s leadership tries to steer the economy away from debt-fueled property investment and smokestack industries, embracing services and domestic-led consumption. At the same time,

President Xi Jinping is stepping up efforts to combat pollution, further squeezing industry.

“There is a big fear this is going to get worse before it gets better,” Hoffman said in an interview. “It’s as bad as the data looks, if not worse.”

And the data doesn’t look so hot especially after last month’s contraction territory PMI print and collapsing rail freight number. Then there’s rising NPLs which are prompting the country’s largest banks to slash payouts as loans to manufacturers sour in the face of the very same economic transformation cited by Bloomberg. Finally, China has a small smog problem and while Beijing is apparently trying to export some of this to places that can use a little more pollution (like the rainforest), some estimates suggest that cleaning up the country’s air will come at the price of a 40% decline in industrial production.

Considering all of this, it’s no wonder that Credit Suisse is out with the following bearish commentary which supports a rather dire outlook going forward:

We have made fundamental changes to our demand analysis for iron ore. Given sharply weaker regional steel prices, we now assume a reduction in Chinese steel exports over the period to end-2018. Given a weak domestic backdrop for steel consumption, this results in steel production declines over the next three years. 

2016 is likely to be even tougher year than 2015 for prices as China steel production declines persist (forecast down 0.6%), Roy Hill mine comes to market, BHP adds 25Mtpa, and Rio Tinto continues its ramp up towards +350Mtpa output. In 2016, we expect the most marginal tonnes will have exited the previous year, so the reduction of China domestic tonnes and the retracement of "Other" seaborne tonnes will have slowed. Another period with aggressive pricing will be needed to clean out the new marginal tonnes. We forecast a price of $45/t CFR for the first two quarters next year.

Our China colleagues expect steel growth rates to be negative. Figure 10 shows how far China's domestic steel consumption has contracted from peak levels of 12 months ago. 

*  *  *

Can you say "hard landing"?

The Global Death Cross Just Got "Deathier"

"X" continues to mark the spot of the death of global investor rationality...

19 "policy easings" since the start of the year have surged global equity prices to record highs but has sent expectations for global GDP growth to cycle lows...

When does the foundation of faith in central planners start to break?

China to cut RRR by 50 basis points

 China's central bank on Wednesday decided to lower the reserve requirement ratio (RRR), the minimum level of reserve banks must hold, by 50 basis points from Feb. 5.

The People's Bank of China (PBOC) also increased support to some target areas, cutting the RRR by an extra 50 basis points for certain commercial banks engaged in proportionate lending to small firms, the farming sector and major water projects, said the central bank's statement.

The Agricultural Development Bank of China, the sole policy lender for agriculture, gets an RRR reduction of 4 percentage points.

Currently, big banks must hold 20 percent of their deposits in reserve, while the ratio for small and medium-sized banks is 16.5 percent.

The move came days after the purchasing managers' index, a main gauge of manufacturing activity, fell below the 50-point mark for the first time since October 2012, a sign of a weakening economy. The world's second largest economy grew at the slowest rate for 24 years in 2014.

The PBOC said that it would "continue a prudent monetary policy, striking a balance between being tight and loose, guiding monetary credit and private financing to grow steadily and moderately, promoting a healthy and steady economy."

The central bank cut benchmark interest rates for the first time in more than two years in November 2014. 

Russia To Accelerate $3bn Of Ukraine Debt

Just 13 short months ago - two months before then President Yanukovich was ousted - Russia lent Ukraine $3 billion (by buying their Eurobonds). As Reuters reports, the terms of that loan included a condition that Ukraine's total state debt should not exceed 60% of its GDP. As of last month, based on Moody's estimates, Ukraine has violated that condition with a debt-to-GDP of 72% (and will likely rise to 85% of GDP in 2015).. and so, according to Russian finance minister Anton Siluanov, "Russia has the right to demand early return of this loan." With European aid 'contingent on major reforms' and possibly taking up to 1 year, this leaves the good old IMF (i.e. the US and European taxpayer) to bridge Ukraine's 'gap' and ironically bailout Russia.

As Reuters reports, Russia can demand early repayment of the $3 billion loan at any time...

Ukraine has violated the terms of a $3 billion Russian loan but Moscow has not yet decided whether to demand early repayment, Russian Finance Minister Anton Siluanov was quoted on Saturday as saying.

Russia lent the money in December 2013 by buying Ukrainian Eurobonds, two months before Ukraine's then-president, the pro-Moscow Viktor Yanukovich, fled the country amid mass protests against his rule.

The terms of the loan deal included a condition that Ukraine's total state debt should not exceed 60 percent of its annual gross domestic product (GDP).

Last month, rating agency Moody's estimated that Ukraine's debt amounted to 72 percent of GDP in 2014 and would rise to 83 percent in 2015. It also said "the risk of default is rising".

"Ukraine has definitely violated the terms of the loan, and in particular (the condition) not to increase its state debt above 60 percent of GDP," Russia's Siluanov said, according to Interfax news agency.

"So Russia definitely has the right to demand early return of this loan. At the same time, at present this decision has not yet been taken."

But, as Bloomberg notes, the European Union "support" could take a while and it is entirely contingent upon tough reforms for Ukraine...

The European Union is considering a further 1.8 billion euros ($2.1 billion) in aid to Ukraine to help the former Soviet republic overhaul its economy, which has been ravaged by a separatist conflict in its easternmost regions.

The European Commission, the EU executive, said the fresh loans, on top of $17 billion already pledged in the International Monetary Fund-led rescue of the troubled country, werecontingent on the Ukrainian government pushing through economic reform measures and fighting corruption.

The EU has provided “unprecedented financial support and today’s proposal proves that we are ready to continue providing that support,” Commission President Jean-Claude Juncker said today in a statement. “Solidarity goes hand in hand with commitment to reform, which is urgently needed in Ukraine.”

...

Disbursement of the aid, which must still be approved by the European Parliament and the EU’s 28 governments, will depend on Ukraine’s adherence to the conditions of the IMF program, which include fiscal consolidation, changes in the energy and banking industries, and other measures, the commission said.

This would be the EU’s third package of loans to Ukraine, following two totaling 1.6 billion euros approved last year. A final portion of 250 million euros from the earlier aid is due to be given within the first months of this year, according to the commission.

*  *  *

So - while Russia 'suffers' under the thumb of plunging oil prices and a tumbling currency crisis, a simple decision to push Ukraine into early repayment could leave Europe - having paid out their entire Ukraine bailout to Russia - asking for moar help from the IMF (i.e. The US Taxpayer) to keep the 'crucial' nation state of Ukraine from default.

US Debt Soars By $100 Billion On Last Day Of 2014, Hits Record $18.14 Trillion

It seems like it was only yesterday when we reported that, in yet another sleight of hand for the US Treasury and Social Security Administration, US debt rose by $32 billion on the last day of November sending total US debt above $18 trillion for the first time ever.  As we further noted, it also meant "that total US debt has increased by 70% under Obama, from $10.625 trillion on January 21, 2009 to $18.005 trillion most recently."

Fast forward to today when we are happy to report that according to the US Treasury, America's debt-funded spending spree, while supposedly slowing down if looking at the declining monthly budget deficit report, never actually has.

As of the last day of 2014, total US debt soared by $98 billion in one day (driven again by Social Security debt surging on the last day of the month to a record $5.117 trillion), and closing off 2014 with a new all time high total of $18.141 trillion in Federal debt - an increase of $136 billion in the month of December and $790 billion for all of 2014.

Source: US Treasury

The Most Important US Events Of 2014, According To Twitter

When it comes to social networks, Instagram is where the world's best food photographers reside, Facebook is where "cool parents" and ad-clicking robots can be found, while Twitter is where the up to the minute super-informed, sophisticated intelligentsia hides. At least according to Twitter. So what did said sophisticated audience find to be the most important and talked about American events of the year? The following infographic from Echelon Insights gives the answer:

The top 10 US stories of 2014 were:

1. Ferguson
2. Midterms
3. Ebola
4. Israel
5. Iraq
6. Russia/Ukraine
7. Sterling/Clippers
8. Guns
9. Obamacare
10. Marijuana

What is more interesting is that the top 2 most talked items were defined as such by Liberal Activists, where the topic dearest to Conseratives' hearts, Guns, was only 8th in the combined ranking.

Which begs the question: while the media may or may not have a liberal bias, it does appear that the main talking points in at least media distribution outlet are set by those a liberal bent. Maybe simply because they have far more time to retweet and engage in meaningless Internet debate?

Meaningless internet speculation aside, here is how 2014 progressed through the eyes of Twitter users.

Popping The Chinese Stock Market Mania

If you are wondering what triggered the PBOC to pull the punchbowl of leveraged collateral away from the 'wealth-creating' stock market exuberance in China... wonder no more. The last 2 weeks saw the biggest surge in new Chinese brokerage accounts ever, with this week alone the highest since October 2010 and January 2008 with a stunning 228,000 new accounts opened. On both prior occasions of such a maniacal surge in speculative accounts, the Shanghai Composite made a significant top and fell dramatically in the ensuing months.

How oddly dis-similar the PBOC is to the Fed!! Instead of encouraging open leveraged speculation, the central bank of China appears more risk averse, recognizing the potential medium-term disastrous consequences from such boom-bust moves (and likely has no cheer-leading CNBC channel to take care of).

Goldman Sachs says India to outpace China in coming years

Goldman Sachs is saying that India could surpass China in the next two years in terms of real gross domestic product expansion

• Projects India’s real GDP growth rate will remain behind China’s this year and next
• But surpass it in 2016 with 6.8% GDP expansion as China’s growth slows to 6.7%
• Goldman predicts that India will extend that lead over the following two years
• Goldman says India will have one of the highest growth rates in the world in 2016  – more than triple the growth rates of Brazil, Russia, Japan or Europe

China Fixes Yuan At Strongest Since March As Trade Surplus Hits Record Highs

Chinese imports and exports dramatically missed expectations this evening but it is imports that was thereal driver that pushed the trade surplus to $54.47 billion (higher than the $43.95 billion expected) record highs. Exports rose just 4.7% YoY (against expectations of an 8.0% rise and previous 11.6% rise) for the slowest growth since April. Imports utterly collapsed; plunging 6.7% YoY (against expectations of a 3.8% rise and prior 4.6% YoY rise). This is the biggest drop since March and 4th largest plunge since Aug 2009. Of course, in any real world this means 'the rest of the world' should be suffering from huge drops in exports... but we are sure, by the magic of fradulent invoicing that will not be the case. The PBOC may have got a glimpse and fixed CNY at its strongest since March and highest premium to the market since August.

Both imports and exports miss dramatically

Pushing the trade surplus to record highs...

PBOC fixed the Yuan at its strongest against the USDollar since
March as the market's view of USDCNY started to rapidly weaken...