China capital outflows

Posted: February 5, 2016 in china, Uncategorized

An article on Bloomberg shows how big the China issue is.

In 2014 China had reserves of almost USD4 trillions and that was why China was considered unbreakable.

Fast forward one year and in January 2016 the reserves USD3.2 trillion.

And mind you the capital outflow started in July/August 2015.

January was the worst month on record (estimated USD$118 billion versus the second worst, December 2015 – USD108 billion).

China has still three times the second largest holder of reserves (Japan), but  it is pattern that is not sustainable. It is practically USD600 billion in the last 6 months!

Probably it will even get worst before it at least plateau (technical analysis for the Shangai Composite is 2,400)

So, apart a medium range buying pressure, the market is still in downtrend as I keep repeating.

Also, this is not the death of China. It is just a transition and the share market investors in China are really few in relation to the overall population (well the US survived the 1929 crash, the 1970s with Watergate and debacles in Vietnam and Iran etc) and transition are brutal even in controlled environment. The only thing that could really cause an issue is mass unemployment.


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