43 out of 45 global markets are oversold, according to BAML's "Breadth Buy" indicator. These extreme signals tend to be followed by a short-term 6-7% bounce, but, cautions chief investment strategist Michael Hartnett, a sustained rally would require a shift in policy behavior. What's more, the 2 markets not in oversold territory are the U.S. (SPY) and Japan (EWJ, DXJ) and they're kind of important. Most oversold: Brazil (EWZ), Turkey (TUR), South Africa (EZA), Mexico (EWW), Materials (XLB), China (FXI, CAF). Least oversold (in addition to the U.S. and Japan): Health Care (XLV, IYH), and Consumer Discretionary (XLY).
Chinese markets are calmer, although shares are lower, after the People's Bank of China said that it has provided liquidity to banks and that it will inject cash "based on the market's actual situation." The PBOC also said it will maintain its "prudent monetary policy," suggesting continued tightening. The comments reflect a further attempt by the PBOC to ease the credit crunch it engineered last week as a strategy to slow China's lending boom. Share (FXI) are -1.1%, while interbank rates dropped to 5.51% from 5.8%.
iShares FTSE China Large-Cap ETF (FXI)announces quarterly distribution of $0.8390. 30-day SEC yield of 2.05% (as on 05/31/2013). For shareholders of record June 27. Payable July 02. Ex-div date June 25.
Chinese (FXI) and Hong Kong shares recover smartly from an earlier pounding on rumors of a press conference in which the PBOC will raise the white flag to China's "feral hogs." However, as Zerohedge points out, the party mouthpiece, the "China Daily," wrote an oped today saying that the sell-off in shares demonstrates that the government is prepared to continue its painful but necessary reforms. China -0.5%, Hong Kong (EWH) +0.5%.
The Shanghai Composite (FXI, CAF) tumbles again, off another 3.8% in late morning trade, bringing its loss over the last session and a half to about 9%. The Hang Seng (EWH) is lower by 1.1%. Elsewhere in the region - Japan, South Korea, Australia - shares are marginally higher. S&P 500 futures -0.25%.
Influential technician Tom DeMark calls a bottom in China, saying his indicators flashed buy on June 21. His note went out before last night's 5.3% plunge, but he did say it could take a couple of days for the Shanghai Composite (FXI, CAF) to gain traction. "It is ideal for a market to bottom in conjunction with negative news to exhaust a downtrend and encourage the last weak seller to capitulate."
FXI slumps 2.8% premarket after the PBOC signalled it sees no reason to step in to ease a liquidity crunch in the financial system, and the Shanghai Composite dove 5.3% overnight. Veterans of central bank-speak know the drill - 1) act tough 2) act tough some more 3) cave. It's worth noting benchmark money market rates tumbled for a 2nd consecutive day, the overnight repo rate off 196 bps to 6.47% (it had been near 13% two sessions ago). Tracking the Shanghai Composite a bit more than FXI might be CAF and it's off 18% in a month compared to 12% for FXI.
The focus of stock-market angst in Asia has turned from Japan to China, where shares (FXI) slumped 5.3% on continued fears about the cash crunch in the banking sector, as well as about the ending of the Fed's QE policy. While the PBOC stepped in on Friday to ease liquidity, today it said there's enough money in the markets. Elsewhere in the region, Japan -1.3%, Hong Kong (EWH) -2.2%, India -1.1%.
Off another 0.5% overnight even as the PBOC reportedly eased cash-crunch concerns for the banking system, stocks in Shanghai (FXI, CAF) fell 4.1% on the week and are off 11% thus far this month. "Balancing growth would be achieved easier by boosting consumption, not by restricting credit," says Credit Agricole's Dariusz Kowalczyk, expecting more steps to ease liquidity for lenders.
China's GDP growth forecast is cut to 7.4% by HSBC for both 2013 and 2014 from 8.2% and 8.4% previously. HSBC's view is now south of consensus as chief economist Qu Hongbin says reform measures - positive in the long-term - will actually be harmful to growth in the more immediate future. Shanghai (FXI, CAF) continues to slide, falling another 0.75% overnight.
"The biggest contrarian play in the market today is assets linked to China (FXI, CAF)," says Michael Hartnett, summarizing BAML's latest Fund Manager Survey, which shows money flowing out of commodities (DBC) and emerging markets (EEM, DEM, VWO). Where's the money going? The eurozone and the U.S. Where it's not going is fixed-income (AGG, BND) - 50% of managers say they're now underweight bonds as opposed to 38% last month.
Asian stocks fall sharply and then recover some but not all of their losses a day or so later. That seems to have been a recurring pattern over the past few weeks since the great global sell-off began and the past couple of days have been no different. Shares bounced back today, helped by decent retail sales data in the U.S. yesterday and a report that the Fed's QE tapering will be so gentle you won't even feel it. Japan (DXJ) +1.9%, Hong Kong (EWH) +0.4%, China (FXI) +0.6%, India (INDY) +1.5%, Australia (EWA) +2%, Philippines (EPHE) +2.1%, Thailand (THD) +3.6%.
It's not only Japanese shares that are suffering, the rest of Asia is too. China (FXI) sinks 2.9% after a three-day holiday, with today being the first session following disappointing economic data at the weekend. Hong Kong (EWH) is -2.9%, while the sell-off in emerging markets continues as the Philippines drops 5.7% and Thailand 5.5%.
Asian markets fall as investors position themselves for weak U.S. payroll figures today and for Chinese economic data over the weekend. Japanese shares (NKY) enjoy another roller coaster day but end a mere -0.2%, while the dollar-yen is -0.4% as the Japanese currency continues to strengthen. In China, stocks (FXI, CAF) drop for a seventh day in a row amid fears about economic growth and tightening liquidity, while Hong Kong's (EWH) fall of -1.3% puts it in and around correction territory. India +0.5%.
China (FXI, CAF) fell 1.3% overnight, its 6th consecutive decline - the worst losing streak in a year. Among the decliners was China Vanke (CVEKY.PK), sliding 2.9% as its chairman warned of a property (TAO) bubble in the country. "If the bubbles are not controlled, the result will be catastrophic."
The iShares FTSE China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index.
See more details on sponsor's website