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- On China and What the World Won’t See During the Olympics [view article]
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- Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
- Finding Your Comfort Zone with Currency Investing [view article]
- Six Ways to Trade Foreign Currencies [view article]
- Multinational Corporations Step Up the Search for the Next China [view article]
- Wednesday Currency Roundup [view article]
- Jim Rogers' Picks and Pans - Barron's Interview [view article]
- New Currency ETFs - Give Them Some Time [view article]
- How Bad Is the Dollar's Fall? [view article]
- Currency ETFs and ETNs [view article]
- Pause For Concern On Chinese Currency ETN [view article]
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- Getting Through the Mess in the Markets
- On China and What the World Won’t See During the Olympics
- China's Impending Financial Crisis
- Good Time to Buy Chinese Currency: Follow the 'Hot Money'
- Finding Your Comfort Zone with Currency Investing
- Multinational Corporations Step Up the Search for the Next China
- Wednesday Currency Roundup
- Six Ways to Trade Foreign Currencies
- As Traders Prepare for the Long Weekend, Dollar Goes Soft
- New Currency ETFs - Give Them Some Time
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Denlinger
China's Impending Financial Crisis [view article]
Everything points to the Chinese government not having acted fast/hard enough to stem the capital inflows, and the recent oil price rise and capital inflow restrictions almost seem like panic reactions.The picture I get is that there will be major steady rises in all commodities, especially food, and price stagnation in real estate. Already there is major pressure on RE developers in China, who are having to live with increasing interest rates and a public which is becoming more wary about investing in housing in the face of rising prices across the board.
In the face of this, it may even become likely that the Chinese government will come down hard on "speculators"... who play the yuan rise. The purpose would be to make an example of them and discourage the practice. Reply
leaders
China's Impending Financial Crisis [view article]
"As soon as Iran/Iraq situation is under control from the view of the US. **And the fed have printed enough money to make the financial system solvent again**, "can you explain how this sentence makes any sense whatsoever, plzthnx. Reply
China's Impending Financial Crisis [view article]
Good article! ReplyChina's Impending Financial Crisis [view article]
The RMB NDF Implied Rates can be very volatile and has no real estimative value looking out longer than one year. There is no way that the RMB will be sitting at 6.0-6.3 in 3 years. The world will not Stand for it especially as in real terms the Yuan has not been revalued at all against the USD in real terms yet. The Euro has strengthend more against the USD than the Yuan. So far we have seen dollar weakness not Yuan strength. Indicative by looking at the other rates against the Yuan.The RMB forwward market, FX swap markets are essentially closed and controlled by SAFE. SAFE have been closing access to the FX swap markets recently citing 'national security'. In other words they dont want the market pricing these instruments, the Government wants to be able to keep on manipulating the currency and its associated instruments.
Lots of very likely sceanrios could effect the RMB rate very strongly, the forward market does not price in these scenarios as it is lagging due to it essentially being a closed system.
For example it is becoming ever likely that the USD is going to start its next leg of weakness after consolidating for the past few months. We could see a 10% decline very quickly across the board. Especially with the solvency crisis hitting the USA financial institutions and the fact US interest rates are going nowhere this year.
This will have a direct effect on the RMB rate, especially with the Europeans demanding that China takes some of the FX pain that they are taking with the falling of the USD. This will not show up in the forward market until it hits the spot market. Really the spot market is the pricing mechanism for the forward market. Thats the reality.
The Chinese Central Bank is already very worried about high inflation, however I predict shortly that we are going to see a huge uptick in broad based inflation because now all producers are starting to raise their prices in line with the increase of their spiralling costs. Everything is going to go up. EVERYTHING
They will then be left witht he reality that RMB rate is the only way they are going to be able to get inflation under control. The second all the powers at be in China believe that they have an advantage in faster RMB revaluation, the rate will move very quickly in the spot market. This shift in desire can not be predicted far into the future in looking at RMB forward rate. In fact the totally opposite, SAFE will drive the RMB down to flush out speculatiors before any major revaluing upwards. If you watch the market like I do, you will know this happens a lot.
In terms of depreciation caused through otuflows, if the Chinese believe that Money Outflows will put the system at risk when the RMB hits an equilibrium rate. They will simply put in place measures to stop money going out of China. The Chinese really would not think twice about doing this. And believe me it will be a lot harder to get money out of China if they do this than getting it in.
I very strongly believe that if the USA does not have near term plans to convert the USD into the Amero. That they will be looking at a rate of 5rmb - 1 USD in the next two years. Threatening trade embargos if they dont get what they want. Their stance will become ever harder especially as they now realise China is not a friend at the UN table. As soon as Iran/Iraq situation is under control from the view of the US. And the fed have printed enough money to make the financial system solvent again, the USA approach towards China will change drastically. This is the risk I see in the Chinese system going forward.
Reply
China's Impending Financial Crisis [view article]
Would you please elaborate on the statement you made "and those investors solely within the country to take advantage of the appreciating currency will begin to pull back." Are you implying that people are living in China just so they can bring US currency in and out to make a profit? Or are you talking about somewhat shady "sham" businesses. Maybe we need to know just why you are in Hong Kong? ReplyChina's Impending Financial Crisis [view article]
Very interesting article. It implies 2 or 3 years from now the USA will still be in recession. It could happen, as happened in Japan in the 1990s. ReplyChina's Impending Financial Crisis [view article]
Very interesting article. It implies 2 or 3 years from now the USA will still be in recession. It could happen, as happened in Japan in the 1990s. ReplyGood Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
Totally agree with you, rlirphin the East part of China, the Wenzhou underground "bankers" are among the most famous, and the most aggressive.
Also, to reply to the last line of the author of the article, it is not just how to bring in your US$ or Can$ that you need worry about...
For this, you could do like most Chinese and Overseas chinese do: use multiple benerficiaries accounts ...Since legally, each personal account is limited to us$ 50,000/ year...
The most difficult part will be to take your money out, the day hot money will not be hot anymore..and when everybody will be fleeing for the escape door at the same time. Reply
Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
Michael Pettis wrote earlier about where the "hot money" went. It could not go into the stock market because it was halved in seven months. The hot money could not go into local real estate market because housing prices everywhere in China except Shanghai has been going down for the past eight months. The inflow of money if calculated correctly went to the "underground finance companies" which loan out money at 5% per month.For those who live in China please check with your local business pals. I live in Guangzhou and their answers lead me to believe it is impossible for local small businesses to borrow from local banks. To obtain the funding they must borrow from "underground finance companies" which in the US would be called loan sharks.
Who is to blame? Naturally the Chinese government who set up those ridiculous capital control mechanisms. While the government complains about the amount of inflow of foreign capital do you know that I can not wire out the "foreign capital"? Once the foreign capital arrives and even if the money moves to a CD it cannot be converted back into foreign currencies and to be wired out.
Reply
Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
If there is a risk of stagflation, PBOC will look to raise interest rates and control it at the expense of growth. It will also cause the rate of funds inflow to slow as investors are usually scared off by the term stagflation... Things can turn around mighty fast as foreign investors get cold feet. Besides the pull out of funds willl be faster as is evidenced in India. Don't follow the hot money because it is very hot already. ReplyIt
Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
James V, thanks for the explanation. Now I can easily see how the Chinese Governments balance sheet is affected by trade between private companies. Does trade between free market governments (say Canana & U.S.) work the same way?Also, does it work the same way in the Euro zone even though they use the same currency?
Reply
Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
Think-About-It - all the USD/foreign currency that is sent to private corporations can not be taken out of the bank by the private corporations. Instead the government the government puts it in its pocket and prints RMB to give to the corporations.To keep RMB low the Chinese Government holds the USD.
This is basic crude example. But it effects the closed currency system and gives an idea how they keep the yuan under control.
Reply
Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
China still controls money going in and out of China. The 70% cannot just go in. If these 70% is causing the raise of inflation, it can be stopped. ReplyIt
Good Time to Buy Chinese Currency: Follow the 'Hot Money' [view article]
Answer: Buy CYB or CNY. I own CYB which pays a money market rate plus or minus any change in exchange rates between $USD & Yuan.I have a dumb question. Everyone says that if there is a trade imbalance then one government adds to its current account while the other draws down their current account (lowering reserves or adding to their debt ala USA). But isn't that only true if the trade happens directly between governments? If if happens between private enterprises how does that translate to the government's respective reserves or current accounts?
Reply
Finding Your Comfort Zone with Currency Investing [view article]
Hi, Les,I am not aware of much research on currency ETFs. They are probably too new to attract much attention from analysts. However, even if they were I would be skeptical of their opinions. I'm equally skeptical of my own. No one can do much of a reliable prediction in this type of market, in my opinion. Things can turn on a dime at the slightest quiver of a wind from any direction.
I have read a book on trading currencies, and I thought it was fairly good. Remember, all we have are opinions, and currency trading (vs. investing) is not necessairly a teachable subject. The book I read is : Getting Started in Currency Trading by Michael Duane Archer. It is probably out of print, but I found a copy at Amazon. Also, there are a couple of authors who contribute to Seeking Alpha. Chen and Lieu (if my spelling is correct) are two you might check on.
I would encourage you to approach this subject with the greatest caution, and consider, instead, currency investing--something like the carry trade. Trading is fast paced and will eat you up fast if you are not exceptionally able to cope with it. Few are!
Good luck.
Ray0 Reply