Chinese Stock Market bows to the Party! And a strange pattern

Posted: July 23, 2015 in Uncategorized

China Security Finance Corp. (subsidiary of the Chinese Security Regulatory Commission (part of the Chinese Central bank) has entered the market with a margin trading facility of USD483 Billion (the Chinese market is approximately USD6.6 trillion).

This is on top of arresting short traders (it is illegal for anyone holding more than 5% of a company to sell, “convincing” stockbrokers to invest (also I would be convinced to buy!).

Practically nationalised the stock market.

Please do not think…dodgy Chinese. The US has its own “plunge protection team” which does similar things – just more subtly

——

JPM and Goldman institutional desks have also alerted to another strange issue about China.

After years of accumulating US Treasuries – they are selling en masse (in the last 6 months China sold USD143 billion US Treasuries and circa a total cash outflow of over USD500Billion). China US Treasuries reserves are still USD1.3 Trillion.

Why? That is the issue…some answers around the net.

– The issues in China are much bigger than anyone thinks

-It is part of a strategy of “killing” the US Dollar as world reserve currency

-It is just a prevention of the US rising interest rate (even if the amount seems too much).

Your questions should be two

– How long before the media at large will catch up with this pattern

– The bond market is already illiquid – what will happen if, at the next auctions of US Treasury 10 year, China will not be a buyer? (hint: forget rate hike and look at Quantitative Easing number 4)

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