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Feb. 3, 2014, 8:43 AM
- In order to draw the necessary capital to pull emerging markets out of their swoon, real interest rates have to go higher, says Citigroup. A near-doubling of the benchmark rate in Turkey last week only pulled one-year borrowing costs up to 3.6%, less than half the average in the thee years prior to 2008. The real yield in Mexico (EWW) is about zero. In South Africa, it's 1.4% vs. 2% over the past decade.
- “When you have low real rates and try to finance your current-account deficits, it usually won’t work,” says Citi LatAm strategist Dirk Willer. “If the U.S. is repricing for higher rates, it’s very difficult for you to get away with lower rates. South Africa (EZA) and Turkey (TUR) are not safe yet.”
- EEM -0.5% premarket
- Related ETFs: EEM, VWO, DEM, EDC, DGS, EDZ, CYB, EEMV, SCHE, EEB, CNY, EDIV, BZF, IEMG, DVYE, EEV, EWX, BIK, BKF, CEW, PIE, ICN, ADRE, HILO, INR, EUM, FNI, EET, FXCH, GMM, PXH, INCO, EEMS, BBRC, EELV, FEMS, DGRE, EEME, AYT, EMDD, BICK, DBEM, EMCR, PGD, FEM, EWEM, EMLB, JEM, EMBB, EVAL, TLTE, EEHB, EGRW, FNDE, EMDG, EMHD, EMSA, EMFT, EMDR, QEM, QDEM
Feb. 3, 2014, 1:51 AM
- China's official non-manufacturing PMI slipped to its lowest level since December 2008 in January, falling to 53.4 from 54.6 in December.
- The drop adds to declining manufacturing PMI indices, although the trend has partly been attributed to the Lunar New Year as people traveled home for the holiday.
- ETFs: CYB, CNY, FXCH, FXI, PGJ, GXC, FXP, YINN, HAO, TAO, CHIQ, CHIX, KWEB, ASHR, YANG, MCHI, PEK, CQQQ, QQQC, XPP, YAO, CHXX, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, CHNA, TCHI
Jan. 30, 2014, 1:17 PM
- “International monetary cooperation has broken down,” says India central bank boss Raghuram Rajan, a day after the Fed boosted the size of its taper and made no mention of melting-down emerging markets. Rajan joined counterparts from Turkey and South Africa this week in boosting rates to try and stem the slide in their domestic currencies.
- "The challenge is brought on by their own domestic policies," says former Fed Governor Randy Krosner. "It's unfair to say it's all the Fed's fault."
- Back in his IMF days in 2011, Rajan authored a report calling for the formation of a committee composed of representatives from the major central banks who would report on the spillover consequences of their individual policies. Good luck with that one.
- Emerging markets are getting a respite today amid a big rally in the West (of the West is rallying because of a respite in emerging markets).
- EEM +0.8%, VWO +1%.
- TUR +1.9%, EPI +1.7%, ARGT +0.5%, RSX +0.7%.
- Related ETFs: EEM, VWO, DEM, RSX, EDC, EPI, DGS, INDY, EDZ, CYB, SCIF, PIN, INP, EEMV, EZA, SCHE, EEB, CNY, EDIV, INDL, BZF, IEMG, DVYE, RUSL, EEV, BIK, EWX, BKF, CEW, PIE, ICN, ERUS, ADRE, HILO, INR, RUSS, INDA, SCIN, INXX, EUM, FNI, RSXJ, EET, FXCH, RBL, GMM, PXH, INCO, EEMS, BBRC, EELV, SMIN, FEMS, DGRE, EEME, EMDD, BICK, AYT, DBEM, EMCR, PGD, FEM, EWEM, EMBB, EMLB, JEM, EVAL, TLTE, EEHB, EGRW, FNDE, EMDG, EMHD, EMSA, EMDR, EMFT, QEM, RUDR, QDEM
Jan. 30, 2014, 2:03 AM
- Chinese manufacturing activity contracted for the first time in six months in January as HSBC PMI fell to 49.5 (flash 49.6) from 50.5 in December.
- The growth of output eased to a marginal pace and jobs were cut at the fastest rate since March 2009, HSBC says, while there were "marked falls in input costs and output charges."
- "A soft start to China's manufacturing sectors in 2014, partly due to weaker new export orders and slower domestic business activities," HSBC says.
- The Shanghai Composite is -0.7%. (PR)
- ETFs: FXI, PGJ, GXC, FXP, CYB, YINN, HAO, CNY, TAO, CHIQ, CHIX, KWEB, ASHR, DSUM, YANG, MCHI, PEK, CQQQ, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHNA, CHLC
Jan. 24, 2014, 4:23 AM
- Asian shares have mostly fallen as investors have seemed to grow more fearful about the significance of poor Chinese manufacturing PMI data yesterday.
- Investors have sought safe havens such as the yen - the USD-JPY is -0.3% at ¥103 - helping to send the Nikkei -1.9%.
- "A correction could occur," says investment strategist Shane Oliver. "We have to expect more volatility. Shares are no longer dirt cheap, meaning the easy gains are behind us."
- The once place where the PMI data didn't seem to to have an effect today was China, whose Shanghai Composite rose 0.6%. Stocks were partly boosted by money market rates falling again following a $42B+ injection of cash this week from the central bank ahead of the Lunar New Year. The seven-day repo rate dropped 77 bps to 4.61%.
- "Bad news has been digested and liquidity has eased," says analyst Du Liang.
- China ETFs: FXI, PGJ, GXC, FXP, CYB, YINN, HAO, CNY, TAO, CHIQ, ASHR, CHIX, YANG, MCHI, DSUM, PEK, KWEB, CQQQ, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, ECNS, CHIE, YXI, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
- Japan ETFs: DXJ, EWJ, FXY, YCS, JGBS, JGBD, DFJ, JYN, NKY, DBJP, EZJ, EWV, YCL, SCJ, DXJS, JSC, ITF, JGBL, JPP, JPNL, JGBT, JPNS, FJP, JGBB
Jan. 22, 2014, 9:52 PM
- China January HSBC flash PMI: 49.6 versus 50.6 expected and 50.5 previous.
- This is the first print below 50 (the line separating contraction from expansion) in six months.
- New orders sub-index: 49.8.
- ETFs: FXI, PGJ, GXC, FXP, CYB, HAO, YINN, CNY, TAO, CHIQ, ASHR, CHIX, YANG, MCHI, PEK, DSUM, KWEB, CQQQ, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, ECNS, CHIE, YXI, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 22, 2014, 2:58 PM
- So says the country's Beige Book - a quarterly survey of Chinese businesses and banks. Banks have money to lend, but "fewer and fewer firms are doing any borrowing ... credit is largely being siphoned off by a privileged elite." As the pointed remark might indicate, this Beige Book is not a creature of Beijing, but instead a private effort.
- "Bankers and the government may insist the credit spigot remains open, but it is not open for most and liquidity is not financing genuinely new economic activity.”
- China-related ETFs: FXI, PGJ, GXC, FXP, CYB, HAO, YINN, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, DSUM, KWEB, CQQQ, QQQC, XPP, YAO, CHXX, CHII, FXCH, CHXF, ECNS, CHIE, YXI, CHIM, KFYP, FCA, TCHI, CHLC, CHNA, EWH
Jan. 22, 2014, 5:03 AM
- Chinese shares led Asian shares higher, with the Shanghai Composite rising 2.2% as stocks built on yesterday's gains following the injection of liquidity into money markets by the People's Bank of China in order to avert a cash crunch. The PBOC is expected to add more funds in operations tomorrow.
- "The cyclicals and the blue chips are leading the rebound today, which usually points at policy relief," says analyst Cao Xuefeng. "It's more a relief rally at this point."
- In Japan, the Nikkei rose 0.2% after the BOJ again maintained its ultra-loose monetary policy as is.
- Elsehwere, Hang Seng +0.05%, India +0.4%.
- ETFs: FXI, PGJ, GXC, FXP, YINN, HAO, CYB, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, KWEB, DSUM, CQQQ, QQQC, XPP, YAO, CHXX, CHII, FXCH, CHXF, ECNS, CHIE, YXI, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 21, 2014, 3:36 AM
- Having surged 153 bps yesterday, China's seven-day repurchase rate fell 88 bps to 5.44% today after the People's Bank of China injected over 255B yuan ($42B) into the financial system and expanded a loan facility in order to meet demand for cash ahead of the Lunar New Year.
- The PBOC's action helped the Shanghai Composite rise 0.9% and the Hang Seng 0.5%.
- Meanwhile, the shares of eight small companies jumped on their trading debuts today, prompting the Shenzhen Stock Exchange to warn about "blindly" speculating in IPOs. The stock moves highlight the demand for new listings following the end of a year-long moratorium on IPOs.
- ETFs: FXI, PGJ, GXC, FXP, YINN, HAO, CYB, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, KWEB, DSUM, QQQC, XPP, YAO, CHXX, CHII, FXCH, CHXF, ECNS, CHIE, YXI, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 20, 2014, 2:08 AM
- Chinese GDP slowed to +7.7% on year in Q4 from +7.8% in Q3 but topped consensus of +7.6%.
- On quarter, GDP +1.8% vs +2.2% and +2%.
- 2013 GDP +7.7%, as in 2012.
- Industrial production +9.7% on year in December vs +10% in November and forecasts of +9.8%.
- Retail sales +13.6% +13.7% and +13.6%.
- Urban fixed-asset investment +19.6% vs +19.9% and +19.8%.
- The value of new homes sold jumped 27% in 2013 to 6.8T yuan ($1.1T), the first time the figure has passed $1T (see also).
- The slowdown in growth comes as the Chinese government starts to implement a major reform program aimed at rebalancing the economy away from heavy industry and exports more towards economic liberalism and consumption while at the same time trying to cool a sizzling housing sector and reining in soaring debt.
- "Urbanization and investment demand are leading to rising sales volumes, while prices continue to gain," says economist Dariusz Kowalczyk. "China's growth remains heavily dependent on the real estate market."
- Growth has been "fairly resilient," says SocGen economist Yao Wei. "It is more of the outlook that we worry about, especially with the financial risk in the system."
- The Shanghai Composite is -0.7% and the Hang Seng is -0.8%.
- ETFs: FXI, PGJ, GXC, FXP, HAO, YINN, CYB, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, KWEB, DSUM, QQQC, XPP, YAO, CHXX, CHII, FXCH, CHXF, ECNS, YXI, CHIM, CHIE, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 19, 2014, 1:33 AM
- Prices for new homes in first-tier Chinese cities climbed over 15% in December, highlighting the failure of local property restrictions to cool the sector.
- Valuations jumped 20% on year in the southern business hubs of Guangzhou and Shenzhen, 18% in Shanghai and 16% in Beijing.
- Prices increased in 69 of the 70 cities tracked by the government.
- Meanwhile, Shanghai has set a growth target of 7.5% for this year vs an expansion of 7.7% in 2013, with the city looking to its new free-trade zone to help boost its economy. Shanghai's goal is the same as last year, although at least nine Chinese provinces have cut their targets.
- ETFs: FXI, GXC, PGJ, FXP, CYB, YINN, CNY, TAO, CHIQ, CHIX, YANG, PEK, MCHI, XPP, YAO, DSUM, CHXX, CHII, CHXF, FXCH, YXI, CHIM, ASHR, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 18, 2014, 9:25 AM
- Many have predicted the demise of the China boom and were early, says Felix Zulauf at the Barron's Roundtable, but now it's more obvious "it's in a terminal stage." He's playing it by shorting the iShares MSCI Hong Kong ETF (EWH). The Hong Kong banking system is heavily exposed to mainland China, so when China goes, there could be a banking crisis in Hong Kong. The HK$ is pegged to the greenback, so the HKMA will defend it by hiking rates, smacking the heavily rate-sensitive economy there.
- It's been nearly a decade since Zulauf recommended gold miners, but now's the time the buy the GDX, he says. Gold (GLD) is "washed out ... those who wanted to sell gold have sold it ... Western investors, asset-allocators, ETF players have all sold their gold. The buyers? "Physical gold moved from Western to Eastern hands."
- After 30 years of declining yields, Zulauf isn't a secular bull on U.S. Treasurys, but sees mis-pricing in government paper, noting French 10-year notes yield 50 bps less than comparable U.S. ones. The 10-year Treasury yield could easily fall 75-100 bps and he's a buyer of TLT.
- China-related ETFs: FXI, PGJ, GXC, FXP, HAO, YINN, CYB, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, KWEB, DSUM, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
- Gold and gold miner ETFs: GLD, GDX, GDXJ, NUGT, IAU, PHYS, DUST, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DGZ, AGOL, DGLD, GLDI, RING, GGGG, JNUG, PSAU, TBAR, JDST, UBG
- Long-dated Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, SBND, ZROZ, DLBS, VGLT, UBT, TLO, LBND, TYBS, TENZ, DLBL
Jan. 17, 2014, 4:19 AM
- Asian shares are mainly lower as disappointing earnings results out the U.S. hurt sentiment.
- China's Shanghai Composite closes -0.9% for its third weekly loss. Investors stayed cautious ahead of GDP and other economic next week, while a surge of 43% in the shares of debutant Neway Valve served to highlight concerns that an upcoming wave of offerings will divert money from other stocks. The industrial valve manufacturer is the first company to hold an IPO following the end of a year-long moratorium on new listings.
- Elsewhere in Asia, Japan's Nikkei -0.1%, Hong Kong's Hang Seng +0.6% and India's Sensex is -1%.
- ETFs: FXI, GXC, PGJ, FXP, HAO, YINN, CYB, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, KWEB, QQQC, XPP, DSUM, YAO, CHXX, FXCH, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 15, 2014, 4:43 AM
- Chinese aggregate financing fell to 1.23T yuan ($204B) in December from 1.63T yuan a year earlier, but came in above consensus of 1.14T yuan.
- Still, that and other data reflect the impact of the efforts by the People's Bank of China to rein in ballooning credit growth even at the expense of slower economic expansion.
- New loans dropped to 482.5B yuan in December from 624.6B yuan in November and missed forecasts of 600B yuan.
- Foreign-exchange reserves increased to a record $3.82T at the end of December from $3.66T in September.
- The broad M2 money supply rose 13.6% on year in December vs +14.2% in November and consensus of +13.98%.
- "The slowing M2 growth in December showed central bank's tightening measures have started to bite," says economist Jiang Chao.
- However, the central bank is apparently not having it all its own way, and has reportedly become frustrated at the lack of desire of the China Banking Regulatory Commission to strengthen the regulation of banks' relationships with shadow lenders.
- Meanwhile, at least nine Chinese provinces have set reduced growth targets for this year.
- The Shanghai composite is -0.2%.
- ETFs: FXI, GXC, PGJ, FXP, HAO, CYB, YINN, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, KWEB, XPP, QQQC, DSUM, YAO, CHXX, FXCH, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
Jan. 14, 2014, 5:38 AM
- Asian and European stocks mostly fall following Wall Street's sharp losses yesterday, while U.S. stock futures are flat-to-higher.
- Earnings warnings in the U.S. are among the factors weighing on sentiment.
- However, Chinese equities bucked the tape in Asia, rising 0.9% following four days of losses and after the Shanghai Composite traded at 10.1 times reported earnings yesterday, the lowest since at least 2007. The re-opening of the IPO market has been hurting the mood lately..
- The Nikkei plummeted 3.2% during the first session of the week amid a strengthening of the yen over the long weekend. Elsewhere in Asia, Hong Kong -0.4%, India -0.5%.
- EU Stoxx 50 -0.45%, London -0.4%, Paris -0.5%, Frankfurt -0.6%, Madrid -0.3%, Milan -0.35%.
- U.S. stock futures: Dow flat. S&P +0.1%. Nasdaq flat.
- China ETFs: FXI, GXC, PGJ, FXP, HAO, CYB, YINN, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, QQQC, XPP, KWEB, YAO, CHXX, FXCH, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHNA
Jan. 10, 2014, 2:26 AM
- China's trade surplus dropped to $25.6B in December from $33.8B in November and missed consensus of $31.15B.
- Export growth slowed to 4.3% from 12.7% and vs forecasts of 4.9%, due to a high comparison base a year earlier and a crack-down on speculation disguised as export transactions.
- Imports rose 8.3% vs 5.3%, with estimates also 5.3%.
- "Exports weakened dramatically, but were close to the consensus," says economist Dariusz Kowalczyk. "The data is positive for China and Asia sentiment as it alleviates concerns that China is slowing too sharply."
- Kowalczyk also says that domestic demand is not as soft as had been feared. "The Chinese economy - while decelerating - is unlikely to see a sharp slowdown," he says.
- Exports for 2013 rose 7.9% to $2.21T, imports 7.3% to $1.95T and total trade 7.6%. China expects the growth to continue this year. The full-year trade surplus was $259.75B, the third-largest ever.
- The Shanghai Composite is -0.7% but the Hang Seng +0.5%.
- ETFs: FXI, PGJ, GXC, FXP, HAO, CYB, YINN, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, QQQC, XPP, DSUM, KWEB, YAO, CHXX, CHII, FXCH, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
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