2015-06-30

CREIS: New Home Prices Rise 0.56% in June

53 cities up, 46 down and 1 flat. 15 cities saw prices rise more than 1%. Number of cities falling more than 1% fell to 12.

Here is your bifurcation headline number: the median new home price increased 1.03% in June.

The bottom cities were not no names. Rizhao, Jinan (both in Qingdao), Kunming, Urumqi, Sanya were among the cities with the largest price declines.

Among the winners that aren't top 10 cities: Lanzhou, Baoding, Kunshan and Xiamen.

Shenzhen is still blowing away the competition, up 6.58% in June. It is now pricier than Shanghai. Existing home prices in Shenzhen increased 8.6% in June. Shenzhen home prices are up 13.7% over last year.

Source: 2015年6月中国房地产指数系统百城价格指数报告

MInsheng and Construction Bank Register RMBS

50 billion yuan from CCB and 10 billion yuan from Minsheng.

EO: RMBS注册首单花落民生、建行

72 Hours of Bailouts Fail, 5 Minutes of Magic Reverses Market

QQ: 多方接力出招救市 神奇5分钟终结A股“六绝”
72 hours of bailout efforts:
After the A-share experience "6.26" crash type crash, the government coalition "bailout" had kicked off. Following double down after the central bank announced, the Commission, the Ministry of Finance, Social Security and other government departments who joined the army to support the market, including the Securities Industry Association, fund companies, securities companies also sing the praises of A-shares, the timely introduction good.

Shaking reversal! Shanghai Composite Index nearly point five minutes violent 100 point reversal

Takeaway message from the article: Buy! But pay attention to valuation.

Beijing Existing Home Sales Hit New All-Time High in June

iFeng: 6月京二手房网签量创新高 同比上升170.6%
As of the 28th, Beijing existing home transactions hit 16,086 units, an increase of 5.8% from last month, an increase of 170.6% from last year.

Real Estate Taxes Slowed Due to Market Forces

The pace of reform in real estate taxation has slowed due to the economy and won't pick-up until the market recovers.

With the property market to pick up this year, it is expected next year or two will be re-advance according to the original rhythm estate tax legislation.

iFeng: 国家官员谈房地产税 将在市场回暖后继续推进 (State officials discuss the real estate tax; Will continue to advance after the market warms up)

Aunties Sing National Anthem As Stock Market Reverses

Speaking of a change in mood....

Chinese aunties were singing the national anthem and shouting "unity is strength!" at a stock trading office on Tuesday.

QQ: A股“起死回生”:大妈营业部齐唱国歌

H /A Share Discount List for 2015-07-01


15% Swing in ChiNext

Is this the bottom? ChiNext rallies 15% from the bottom on Tuesday to close up more than 6%. There was no news that warranted a reversal of this magnitude. Or rather, stocks plunged despite all the announced and rumored policies and then rebounded on no new information. As happened last week, investor mood shifted. Whether it holds remains to be seen, but if the 2000 Nasdaq is a model here, there's a lengthy bounce process to follow.

China’s stocks rebound as traders weigh policy support
Speculation is growing that policy makers are preparing measures to prop up the world’s second-largest stock market. The Economic Observer reported the government is considering steps to stabilize equities including a reduction in the stamp tax, while the finance ministry said it will allow the pension fund to invest in shares.

The government is considering a delay in the IPO of China Nuclear Engineering Corp., according to people with knowledge of the matter. The delay is being considered because of current market conditions, said the people, who asked not to be identified because the information is private.

Margin debt on the Shanghai Stock Exchange fell for a sixth day on Monday to 1.36 trillion yuan ($219 billion), the longest stretch of declines since June 2014. A five-fold surge in leveraged wagers had helped propel the Shanghai index to a more than 150% gain in the 12 months through 12 June.

The Economic Observer cited improving sentiment for the rebound. Financial stocks were up sharply, or as Google translate puts it, achieved the Jedi.
EO: 大盘逆空反弹重返4200点 A股人气回升
The disk, the plate almost fully meteoric rise. Where financial stocks led the gains, even in the early disk reproducing panic, it is only financial stocks meteoric rise, especially brokerage stocks, almost soaring, no one fell. Guotai Junan first daily limit, followed by Southwest Securities, Changjiang Securities, Western Securities and other brokerages are sealed daily limit. Banking sector is also doing well, the plate rose 6.67 percent, which Bank of Communications, Bank of Ningbo, etc rose sharply. In addition, pharmaceutical stocks and media and entertainment sector also rose sharply to achieve the Jedi.

Cross Border Mutual Funds Start Wednesday

Good news for H-shares.

Reuters: Hong Kong ETF market braces for competition from China's giants

Emerging Market Capital Outflows

Two weeks ago, FT: Emerging markets suffer biggest weekly outflow in 7 years
In total, $9.3bn left EM funds in the week to Thursday, according to data from funds tracker EPFR, the most since 2008. Of that, $7.1bn came from Chinese equity funds, which had previously seen three weeks of robust inflows including a record $4.6bn in the last week of May. Global EM funds saw $829m of withdrawals, while Latin America funds lost $442m.
It appears this was the smart money based on the reports that have followed.

FT: Bank for International Settlements warns of emerging market risks
Economists and foreign investors may have overestimated the potential economic output of a quintet of Latin American countries by 2 percentage points, leading to the possibility of sharp financial outflows when reality sinks in.

Bloomberg: Brazil ETF Leads Emerging-Market Outflows as Greece Adds to Woes
The iShares MSCI Brazil Capped ETF had about $800 million in withdrawals in the first six months of 2015, according to data compiled by Bloomberg. The fund extended this year’s slump to 11 percent. The Ibovespa retreated 1.9 percent to 53,014.21 at the close of trading in Sao Paulo, the most in a month.

Brazilian shares have dropped 8.7 percent from this year’s high as the nation struggles to shore up the budget and keep its investment-grade credit rating at a time when the economy is set for the worst recession in 25 years. Stocks joined a global rout Monday after Greece shut lenders and imposed capital controls, a measure that will deepen the country’s recession and risk driving it out of the euro.


Nikkei: US rate hike fears make Asia vulnerable to capital outflows
Matthew Sutherland, senior investment director for Asian equities at Fidelity Worldwide Investment, named Indonesia as the most susceptible to the impact of the expected U.S. interest rate increase. "The consensus view is that Indonesia is quite vulnerable," he said, "because they have the biggest current-account deficit in the region."

The Indonesian monetary authorities are trying hard to relieve growing investor concerns. Juda Agung, executive director of economic and monetary policy at Bank Indonesia, the country's central bank, underscored that the country is running a "high-quality current-account deficit," reflecting its infrastructure expansion.

Indian Express: Explained: Capital outflows, pressure on Rupee, but no big India damage likely
The big positive for India since the Greek crisis first unfolded is that it has made the most progress in steadying the domestic economy among all of what used to be the fragile five. According to Sameer Goel of Deutsche Bank, India has taken the biggest strides on fundamental macroeconomic indicators, particularly by way of stabilising external imbalances and accumulation of foreign exchange reserves, so the RBI’s capability to defend the rupee against big capital outflows is much better now.

On the flip side, there have been substantial foreign inflows — well over $ 60 billion — into the Indian debt and equities market over the last 18 months. This raises questions whether some of this money could be vulnerable to exit, should the crisis intensify.

Is the pessimism overdone?
Barron's: Emerging Bond Market Fed Fears Overdone, Fitch Says

The U.S. dollar dropped off the radar after topping in March, but to this point it still looks like a correction within a bull market.

HengTai: Pension Investment Signals Government Determined to Bailout Market

HengTai says the government's decision to invest local pension funds with the central government fund show the government's determination to rescue the market. How fast it happens is another question. Although the government may be blamed for letting a bear market happen, it would face far more justified blame if it puts a large amount of pension assets into an overheated market and subsequently loses money.

机构及专家全面解读养老金入市影响:显示国家救市决心
Interpretation: "basic pension insurance fund investment management approach" to the public for comments

According to Xinhua News Agency, Human Resources and Social Security and Ministry of Finance jointly with relevant departments drafted the "basic pension insurance fund investment management approach" draft, from the now open for comments. Feedback from the public by Human Resources and Social Security and Ministry of Finance Portal. The deadline for comments is July 13, 2015.

...Currently, due to the lack of investment channels operate, the vast majority of pensions are required to deposit a bank or buy a small amount of government bonds, yields a result not withstand inflation and suffered "invisible shrink" of the storm. In fact, in the past few years, China's basic pension fund investment reforms also had two attempts, the first time in around 2008, the second round of reform began in 2011, but ultimately did not make the trip twice reform.
Notice how the supposed genius economic planners decide to invest the pension funds right near market peaks, then get scared and delay until the next market peak? In 2008 the stock and real estate markets peaked. In 2011, the stock market was in a multi-year decline and the real estate market needed government rescue. Is this time any different? Hopefully, the government will start investing slowly, waiting for better prices, and not behave like short-sighted corporate managers who announced the largest stock buybacks at the peak of the bull market.

The return from the central fund has been good:
Reporters from the 2014 annual report of the National Fund for Social Security Fund Council recently released see, in 2014, the National Social Security Fund investment income amounted to 142.46 billion yuan equity, return on investment rate of nearly 11.7%, exceeding the inflation rate 9.69 percentage points over the same period; and despite the investment rate of return Social Security Fund fluctuate with market conditions, the Fund since its inception, its average annual investment rate of return is higher than the average annual inflation rate. Today, Shandong Province, commissioned the National Social Security Fund Council pension investment operations 100 billion fund balance, Guangdong will entrust extended to 2017.

China Development Zones

Chinese development zones are springing up all over the globe.

EO: 中国式产能输出
1999, Haier in Southern California established its first overseas industrial park, two years later, its second overseas park Pakistan Haier Industrial Park in the city of Lahore in Punjab province in the country laid the foundation stone. Haier, in the beginning of the time this is a business after China's accession to WTO "going out" strategy of response is itself overseas "a card". At that time Pakistan means a huge market of 170 million people, and its consumption of household appliances are on the rise, and home appliances, mainly from imports. Prior to the establishment of industrial parks, Haier products have entered Pakistan, sales rose year. "Before 2005 is a stage called the small-scale enterprises in the period of self-exploration," Li Zhipeng said, "These fragmented, the overall size is not large, really began relatively large scale and systematic 'going out', should It is around 2006. "

In 2006, the state of "going out" strategy more attention, the Commerce Department will promote the construction of overseas economic and trade cooperation zone as a key project. Shape Pakistan Haier Industrial Park, home appliances, upgraded to "Pakistan Haier - Ruba Economic Zone" (hereinafter referred to as "Ruba Economic Zone"), which is a home appliance industry, Haier is responsible for the investment, the formation of home appliance The upstream and downstream industries, two of the leading industry is out of the Haier appliance industry itself, including automobiles, building materials and textiles.

During that time, the park began a large-scale rise of overseas Chinese, the main investment, investment objects often are Chinese enterprises. Almost at the same time, private enterprises Holley in Thailand Rayong Industrial Park was established, and attracted more than 20 Chinese enterprises to enter, the success of the park so that the Thai government welcomed the psychological shift from the alert, "Thai government found himself recruited so many years and Suppliers do not move to the mainland business, we look to provoke, and he began to take the initiative to invite us to cooperate with us, "full participation Holley general manager of overseas business 华立泰 country Rayong Industrial Park of Hu Hai said.

He said that at that time, Chinese companies overseas investment is a serious lack of capacity, it alone is very high risk, which is summed up in Holley overseas combat experience, the best way is to make the industrial park.

Zone go out of the speed and magnitude exceeded people's imagination, overseas park step Holley step from Southeast Asia to South America, compared to its first work, Holley park construction in Mexico more localized, more able integration into local development, "the first generation of the park only to meet the needs of enterprises to engage in follow-up of facilities and services are passive to do. The second generation of the industrial park is not just the land bulldozed, the road repair in, connected to water and electricity, but also consider and integration of local communities, "said Hu Hai.

2015-06-29

ChiNext Slides 7% At Open

Here are some Frog and Horse emoticons, a special stock market set. These may be passed around a lot today.

The first is obvious, the second says "trapped" in the stock market. The third says "bye-bye" and the last says "tonight I eat noodles."

People's Daily Lists China's 7 Macro Targets

iFeng: 人民日报披露中国特色宏观经济调控七大目标(名单)
So far, China's macro-control form of the seven goals with Chinese characteristics: economic growth, price stability, control unemployment, balance of payments, fiscal balances, income growth and economic development synchronized, energy conservation.

The multi-target as an overall judgment on the basis of the macroeconomic situation, is conducive to enhancing strategic guidance. In seven goals, if only one target is not achieved, such as the economic growth rate down, while several other targets are within the normal operating range, you do not panic, fuss, do not ignore the various non-professional discussions from home and abroad. If an economy is likened to the ocean sailing ship, the macro-control is the helmsman, the need to maintain adequate psychological endurance and patience, but the need to maintain strategic concentration, and adhere to the "line stability Zhiyuan," the strategy, avoid quick to pedal to the metal , Jicha car and other practices.

Normal economy needs new macro-control targets "new version." Adapt and lead the new normal, the key is to seize the core objectives. How to adapt to the new normal economy, and further strengthen and improve macro-control, and improve macro-control target system, which is currently the focus of economists need to study. At the same time, we should also be short-term and long-term development plan of macro-control combine to make the former and the latter combination, convergence, matches, obedience and service to the latter. This is not only for China's macro-control and experience, but also need to adapt and lead the new norm.
I didn't see currency listed anywhere. Maybe that falls under price stability and balance of payments, maybe not. Maybe it can be a topic of various non-professional discussions.

H / A Share Discount List for 2015-06-30


Migration Undoing the Social Fabric

Daily Mail: Forget the Greek crisis or Britain's referendum, this tidal wave of migrants could be the biggest threat to Europe since the war
Uncontrolled migra-tion impacts unfairly on benefits, education, housing and public transport in ways that destroy any notion of the contributory element that lies at the heart of European welfare states.

As we have witnessed in various European countries, the anger this engenders quickly assumes political forms, with the rise of neo-Nazi parties. What on earth do Europe’s leaders imagine is driving this angry populism, including that of established legal immigrants? The common fisheries policy?

Sections of the liberal media insist on relentlessly depicting the individual tragic stories of illegal migrants, with the BBC correspondent Clive Myrie, for example, telling one passing migrant ‘you’ve made it’ as he disembarked from a rescue ship in the Mediterranean.

In fact, illegal migration is an insidious problem that strips desperately poor countries of precisely the sort of enterprising young people who ought to remain there, while oppressing the poorest sections of our own societies with people who compete for diminishing resources.

It also raises the questions of whether one can simply uproot people from entirely different cultural universes and expect them to thrive in societies that may subscribe to other values, with radically different expectations of their citizens.
It is old news that diversity tears apart the social fabric and reduces trust in a society. Multi-ethnic states are held together by a strong central power or they do not hold together. The Europeans are trying for a multinational effort with the EU which requires putting old nationalities aside, while simultaneously allowing in a flood of migrants that revives those nationalities to a degree unseen since World War II. With social mood already negative and nationalism on the rise, the migration policy is akin to tossing a match into a gas can.

A new study backs up Putnam's finding on the negative effects of diversity: Ethnic Diversity and Social Trust: Evidence from the Micro-Context
In this paper we argue that residential exposure to ethnic diversity reduces social trust. Previous within-country analyses of the relationship between contextual ethnic diversity and trust have been conducted at higher levels of aggregation, concealing substantial variation in actual exposure to ethnic diversity. In contrast, we analyze how ethnic diversity of the immediate micro-context –where interethnic exposure is inevitable – affects trust. We do this using Danish survey data linked with register-based data, which enables us to obtain precise measures of the ethnic diversity of each individual’s residential surroundings. We focus on contextual diversity within a radius of 80 meters of a given individual, but compare the effect in the micro-context to the impact of diversity in more aggregate contexts. The results show that ethnic diversity in the micro-context affects trust negatively, while the effect vanishes in larger contextual units. This supports the conjecture that interethnic exposure underlies the negative relationship between ethnic diversity in residential contexts and social trust.

ChiNext Slides 7.9%


Bloomberg: China’s CSRC Says Margin Trading ‘Controllable’ as Stocks Plunge
China’s securities regulator said Monday margin trading at brokerages was “controllable,” seeking to stem a stock-market rout amid concern traders had borrowed excessive amounts of money to buy shares.

Margin calls on Monday morning on the off-market HOMS pooling system were only about 2.2 billion yuan ($354 million), a “fraction” of total transaction value, the China Securities Regulatory Commission said in a statement on its official microblog. Deposits in margin accounts were “nowhere near” dangerous levels, the regulator said.

Industrial Profits Bifurcating Too; Coastal Regions Quick to Reform See Results

It's not only real estate, industrial profits are bifurcating too.

Reuters: China's May industrial profits edge up 0.6 pct on year
China's industrial profits edged up 0.6 percent in May from a year earlier, the National Bureau of Statistics said on Sunday, slowing from a 2.6 percent rise in April and adding to pressures on the government to step up policy stimulus to support growth.

The bureau said industrial firms still faced weak demand and falling prices, although recent interest rate cuts helped lower costs. April's rise in profits had been the first since last September.

...Profits in the mining sector fell 59.8 percent in the first five months from a year earlier, while earnings of crude oil and natural gas producers tumbled 69.5 percent.

Profits of chemical firms rose 12.6 percent and those of makers of computers and telecommunications equipment rose 24.3 percent, the bureau said.
Bad news for the northeast.

The Chinese article says early benefits are coming to early reformers.

Yicai: 5月工业利润分化继续 早改革者已早受益
Peng Peng also pointed out that the coastal provinces in transition early, benefit relatively early. After the upgrade, the coastal provinces also gradually reduce its dependence on energy resources, the quality of growth has been increasing. "Investment direction on the one hand, the coast is constantly adjusted, mainly for strategic emerging industries, infrastructure and other areas of people's livelihood and social sectors. On the other hand, after the transformation and upgrading the overall quality is also rising."

Land Audit Results Start

Not good.
China's top auditor warns of local debt risks
A recent audit of nine provinces, nine cities and nine counties found local government debt at the end of 2014 was 46 per cent higher than the 2013 level, Xinhua quoted Liu as saying.

But debt grew at a much slower rate this year, expanding just 0.1 per cent during the first three months, it added.

Nomura, the Japanese bank, estimated in a recent research note that by 2014 local government debt had actually reached 22.6 trillion yuan.

Local governments have been allowed some local governments to high-interest, mostly off-balance sheet local government debt for municipal bonds with lower yields.

Separately, Xinhua quoted Liu as saying authorities have investigated more than 2,200 government officials for involvement in major fiscal fraud.

Auditors also found that some 780 billion yuan in land transfers funds were misappropriated by officials to fill administrative expenses gaps, lent to others or used to construct new office buildings and venues, Xinhua said.

2015-06-28

Yuan Plunge

CNY/USD plunges to a 52-week low...

ChiNext Plunges 6.9% Early, Then Bounces; Shanghai Dips Too, But Now Higher

ChiNext was down 6.9% early on, to a low of 2717, but has bounced to a 5% loss. At the low, it was down 31% from the peak. Have to see how this plays out, the early drop is a good sign that like last Tuesday, it was pent up selling. The ChiNext is recovering its losses now. Shanghai suffered a similar dip and is already back to gains.

And the booze: Luzhou Laojiao is limit up 10%. Wuliangye and Maotai also beating the market.

Chinese Headline: Do Greeks Want Money or Face?

iFeng: 希腊谈判破裂实行资本管制 民众纠结:要钱还是面子?

Chinese Government Goes All-In On Equity Bull

This is it. The last major economy in the world has bet all its chips on the financial market.

On Saturday, the PBOC slashed interest rates and the RRR.

On Sunday, the national pension fund has been given permission to invest 2 trillion yuan in local government pensions.

Reuters: China to let NSSF manage $322 billion in local pension funds
China's cabinet has approved plans for the manager of the country's biggest pension fund to manage pension funds worth about 2 trillion yuan ($322 billion) for local authorities, two industry sources with direct knowledge of the matter said.

China is trying to strengthen its pension system to meet the huge demographic challenge of an already-shrinking working-age population as it looks to turn the economy into one driven by consumption and services rather than investment and exports.

The move for the National Social Security Fund (NSSF) to manage and invest more pension funds on behalf of provincial authorities could benefit the stock market, which has fallen 20 percent over the last two weeks.
Chinese coverage dubs it a foregone conclusion.

iFeng: 养老金投资股市或成定局 比例暂定不超3成
Economic Observer newspaper explained obtained from a source close to the experts at the Department who, in one department, the Ministry of Finance and other relevant departments, to the social security fund to invest in stocks, there have been two distinct voices, but the current development pension to invest in stocks probably a foregone conclusion, and further information is displayed, limited to invest in stocks is the highest proportion of not more than 30%.

People close to the above Department expert said, adding that China's pension including basic pension and supplementary pension, as of the end of 2014, China's basic pension accumulated surplus of 3.5 trillion yuan, supplementary pension accumulation fund is more than 7600 billion yuan, according to 30 % share of investment in the stock market accounting, the stock market is expected to invest nearly 1.3 trillion yuan pension.

On Sunday, it was also announced that internal audits at brokerages are complete. This isn't a big change, but it lessens the regulatory scrutiny on Chinese brokers. The timing of the investigation may matter: it began in mid-June as the market peaked. Tightening of margin rules also emerged about the same time.

Wallstreet.cn: 券商外接信息系统自查结束 暂停新增信托等交易功能

State Firms Lied About Profits

Bloomberg: China’s Auditor Says State Firms Falsified Revenue and Profit
Some of China’s biggest state firms were found to have falsified revenue and profits, while some state lenders doled out loans to unqualified borrowers, the nation’s auditor said amid an intensifying crackdown on corruption.

Fourteen state-owned companies, including State Grid Corp., Cosco Group and China Southern Power Grid Co., falsified 29.8 billion yuan ($4.8 billion) in revenue and 19.4 billion yuan in profits, the National Audit Office said in a statement on its website Sunday. The office issued its 2014 work report Sunday, along with several statements and audit reports for individual companies.

H / A Share Discounts for 2015-06-29

The average discount on this list dropped from 44% to 41% on Friday as the A-shares closed the gap by falling more than H-shares.

The Return of Sovereignty

The crisis in Greece has always been at heart a political crisis. Greece appears to have finally reached the endgame when it comes to the debt, but the next step is unknown. Will the EU come together and work with Greece post default, or is an even greater political breakup already developing?

BBC: Peston: ECB to turn off emergency Greek help
The European Central Bank's governing council is expected to turn off Emergency Liquidity Assistance (ELA) for Greek banks at its meeting later today, according to well-placed sources.

So unless Greek savers miraculously decide to cease withdrawing cash from their accounts, Greek banks would find themselves in serious straits as soon as Monday - because the banks have become dependent on ELA, approved by the ECB but supplied by the Bank of Greece, to provide the cash to depositors who want their money back.

"We think the Greek government will have no choice but to announce a bank holiday on Monday, pending the introduction of capital controls," said a source.

Greece to shut banks and stock exchange on Monday
Greek banks and the stock exchange will be shut tomorrow after creditors refused to extend the country's bailout and savers queued to withdraw cash, taking Athens' standoff with the European Union and the International Monetary Fund to a dangerous new level.

Not unrelated to the collapse of political consensus is the increasingly nationalist East.

RT: ‘Slovakia to Slovaks’: Thousands join anti-Islamization protest in Bratislava, dozens arrested
At least 140 people have been arrested in Slovakia’s capital, where thousands gathered for an anti-immigration and anti-Islamization rally, according to local media reports. The march turned violent as protesters scuffled with police.

The march was organized by the Alternativna cesta group via Facebook. It was called to protest against Brussels’ proposal to tackle the influx of migrants to the EU by imposing compulsory national quotas that require EU countries to accept a specific number of new migrants, most of whom arrived in Italy or Greece.

Hungary to build fence on Serbian border to shut out illegal immigrants
Hungary will build a temporary fence on the border with Serbia as fast as possible to stop the flow of illegal migrants, the foreign minister said.

Austria, meanwhile, reacted angrily to Hungary's announcement that, for an indefinite period, it would not take back refugees it registered when they entered Hungary but left for other destinations in Europe before their asylum requests were decided.

Foreign Minister Peter Szijjarto said several laws needed to be amended before construction of the fence could begin so he could not say exactly when the work on the "temporary border seal" could start.

"In the future, we will apply temporary border seals on every border section where there is no other effective way to impede illegal immigration," Szijjarto said, adding that the government had set aside 6.5 billion forints (20.9 million euros) for the project.

NeuEurope: A Hungarian, Italian, and Greek crisis is becoming European
On Tuesday, Hungary moved to unilaterally suspended EU asylum rules requiring the country to take back refugees who have transited through the country. There are precedents. The Berlusconi government had a “see no evil, hear no evil” policy during the Libyan crisis in 2011, refusing to enforce the Dublin Regulations requiring asylum seekers to seek refuge in the first country they set foot. Italy in effect allowed for their travel to France. However, this is the, so called, Dublin Regulation, but this is the first time this is happening openly.

Brussels called for clarification. The Hungarian government’s response is that the asylum system in the country is “the most overburdened among EU member states” dealing with 60.000 people the first half of 2015. The Commission spokesman noted that “Dublin rules do not foresee the suspension of transfers by the receiving member states,” but it will be hard to take any action to streamline the Hungarian government. On the one hand, an extreme response would call into question the impartiality of the Commission and make the practical management of the crisis difficult. On the other hand, a number of member states have increasingly anti-immigration rhetoric and Prime Minister Victor Orban is likely to find ample support for his decision.

Two New Forms of HIV Emerge; MERS in South Korea

A new strain has also emerged in China. Deadly new HIV strain found in Myanmar truck driver near Chinese border
The most sophisticated, and deadly, form of the human immune deficiency virus (HIV) to ever surface has been discovered in the body of a long haul truck driver who regularly travelled the border area between China and Myanmar, according to a new study by Chinese scientists.

The strain of the virus, which can lead to AIDS, carried 14 points of mutation throughout its genome, more than any other strain isolated so far, they reported in the latest issue of the journal AIDS Research and Human Retro Viruses.

The mutations occurred when different types of the virus recombined with one another in the host, the team found.

The large number of mutations suggested the driver may have engaged in unprotected sex on a regular basis, and acquired many viral subspecies from a large number of HIV-infected prostitutes, they reported.
Disease outbreaks are associated with negative social mood. HIV infection rates soared in Greece after the debt crisis began in 2010.

Quartz: Greece’s 200% increase in HIV shows how disastrous austerity can be for public health. I covered this a couple years ago: Negative social mood and disease: HIV, malaria and TB breakout in Greece

Cuba has also seen a new virus emerge. Since the country opened up a few years ago, it become a popular sex tourism destination. This has brought different strains of the AIDS virus from around the globe, where they have mixed into a new super strain.

RT: Aggressive HIV strain leading to AIDS in 3 years discovered in Cuba
A “much more aggressive than others” strain of HIV have been discovered by an international team of researchers in patients in Cuba. It can progress to AIDS in just three years, sometimes even before patients realize they were infected.

The new strain was found by researchers at KU Leuven’s Laboratory for Clinical and Epidemiological Virology, based in Belgium.

They took blood results from 73 recently infected patients – 52 of them diagnosed with AIDS, and 22 patients, who progressed to the disease after a normal long period of being infected with HIV, that’s estimated to be in between 5 and 10 years.

The scientists thus discovered a new faster-progressing strain of HIV, that’s in fact a combination of three subtypes of the virus.
In South Korea, the MERS virus is slowing. MERS death toll in South Korea rises to 32
A 55-year-old man died yesterday of Middle East Respiratory Disease, the health ministry said, putting the latest mortality rate at 17.5%.

That is up from 15% a week ago and 10% two weeks ago, though still lower than World Health Organisation figures which put the mortality rate for the disease at around 36%.

The man was diagnosed on 9 June after contracting the virus at Samsung Medical Centre in Seoul - where about 90 patients, visitors and medical staff had been infected.

The total number of infections remained unchanged at 182 and 15 patients were in critical condition, the health ministry said.
The MERS virus emerged in the Middle East, which has seen increasingly negative social mood over the past few years.

The major outbreaks don't typically occur until the end of the bear market. The new strains of AIDS and diseases such as MERS are potential candidates for the next big outbreak.

A Socionomic Study of Epidemic Disease
Also: Negative Mood Sickens Society

Market Makers Aim to Boost Third Board Liquidity

EO: 新三板做市商窘境
Minsheng three new board research center believes that non-broker involved in three new board-making, to solve the current problems listed pending lake, an active market, and promote the reform of stratification and continuous auction has a positive effect. I believe that time, market makers embarrassment can be eased.

Under the new three-panel issuance of financing rapid growth trend remains unchanged, funds and futures subsidiary, private equity funds involved in market-making, not only for the new Third Market trading is more active and prosperous, but also raised funds to participate in the future, will allow More investors to participate in investment in the new board, the new board to share the growth of enterprises.

2015-06-27

Let 1000 Banks Bloom

Or at least 40.
Reuters: China encourages privately-owned banks, allows more foreign participation
China's banking regulator said on Friday that it will permit the establishment of more privately-owned banks and allow foreign investors to participate in the reform process to help shore up the state-dominated financial sector.

...China restricts overseas investment in a domestic lender to no more than 20 percent for a single investor, and to 25 percent for all foreign investment.

China's top banking regulator also said that more than 40 institutions have submitted applications to establish private banks. In its guidance, the CBRC said it will control the pace of setting up new private banks to help ward off potential risks.

PBOC Goes Nuclear: Cuts Interest Rates and RRR Following Market Plunge

WSJ: People’s Bank of China Cuts Interest Rates
The PBOC cut its one-year benchmark lending rate by a quarter of a percentage point to 4.85% and its one-year deposit rate by the same scale to 2%.

At the same time, it also lowered the reserve requirement by half a percentage point for banks with sizable lending to farmers and small businesses.

The central bank has rarely cut both interest rates and the reserve-requirement ratio on the same day. The last time it did so was in October 2008, the height of the global financial crisis.

Yu Fenghui: Why did the central bank drop a nuke? 央行周末為何放出“核武器”

Yu says the dual cuts are designed to give the stock market a shot in the arm, but he wonders how much of an effect it can have. He wonders what happens if stocks open at a high on Monday and then trade lower on the day, it would show the PBOC's rarely used weapon cannot save the market.

While the stock market may have influenced the decision, if the PBOC wanted to hike rates before Q3 starts, this was the last weekend to do it.

The Crash Isn't Only About Leverage, Insider Selling and Hot Money Also Exit

The Economic Observer considers last week's "large scale detonation."

After all, the market is the market, investors who ridicule months of cumulative rising profits were swallowed in an instant. More deterrent is that while the bull mad dance off with highly leveraged capital in the stock market fell in the encounter, "meat grinder" bear the brunt. Leverage is an important reason for disillusionment of the crash, but not the only reason. Before and after the crash, the sensitive to the touch hot money has begun to flee.
Another issue is new leadership. The New Silk Road "one road one belt" and Internet+ stocks were ravaged by the bears, who will take the baton from the bulls?

Stocks fell 20% in two weeks and on Friday, 70% of the market was limit down. This has investors with only 3:1 leverage nervous and adding money to their account and investors with 5:2 leverage are even running into trouble with some firms. This has a major impact, with one Ping An analysts arguing that it only takes 10% of the market to panic and offset the other 90% of the market.

Hot money was also taking flight.
According to wind data show that from the beginning of June 8 three weeks, every day A-share funds are showing a net outflow trend, as of June 26, Shanghai and Shenzhen cumulative net outflow amounted to 921.8 billion yuan, at the same time, From June 19 began an unprecedented margin regard a net financial outflow in four consecutive trading days, the cumulative net outflow of 84.793 billion yuan, affected by the two financial balances are shrinking from the 18th on the peak 2.273035 trillion yuan 25th to 2.188222 trillion yuan.

Insiders are also selling. At the end of 2014, insiders at 552 companies had 220 billion yuan in holdings, but this number was only 118 billion yuan as of June 26. The most famous example is LeTV.

Reuters: China company insiders skim the cream off frothy stock market
In May company insiders - senior executives or their relatives - sold a combined 1.68 billion shares, a tripling from April, and much more than in each of the previous months of this year, according to data compiled by Reuters.

Share sales by senior managers are sometimes taken as a worrying sign by investors, as they can indicate people who know a company best think its stock price is too high.

...Between June 1 and June 3, Jia Yueting, Chairman and president of Leshi (300104.SZ), sold 35 million shares in the internet firm he founded, making 2.5 billion yuan ($402.85 million).

Leshi said on May 25 that Jia plans in total to sell up to 148 million shares over the next six months or 8 percent of the company, though he will remain the biggest shareholder after that with a 36.85 percent holding.

Back to the EO article, new accounts are also slowing (apparently there is still data out there...)
At the other end leave the capital, the number of investors new admission was beginning to become less, as of June 19, when the A-share week to 991,900 the number of new investors, has been shrinking for the fourth consecutive week, the business department aspects of account advice is also gradually become less, a Beijing brokerage sales department on June 25 only six or seven customers opened accounts, a month ago, the average daily number of accounts have as many as twenty or thirty households.

What comes next? A Shanghai bull, ChiNext bear is unlikely, but investors may shift from small caps to large cap values:
Minsheng Securities chief strategist Li Shaojun told the Economic Observer reported, after the adjustment, the market appears "GEM board of cattle bear" the probability is very low, generating the expected rise in the emerging industry of a bull market, growth stocks are still bullish home. But the biggest possibility is that style more balanced situation, some investors might shift to the appropriate part of the adjustment represented a large financial underestimate the value of blue-chip, thereby changing the status had led a relatively small vote, making the overall market style more balance.

EO: 惊魂626:逾2000支个股跌停,平仓事件成规模引爆

After ChiNext Who Gets Fried Next? 8 Charts to Understand Why You Should BTFD

Predicting the future through history: study the analogues!

September 19, 2000. There is a first gap, followed by the second gap.
Analogy is, K Line September 19, 2000, and K-line today is similar, but the next day to close out the candle. After the market to new lows after the formation of the bottom of the stage.

February 8, 2001. There is a first gap, followed by the second .
In February 2001 this wave of 8 January before the crash - the 9th, the main stock index fell the first trading day, the next day received a long lower shadow. This is the 2015 5 28th - the 29th similar.

Analogy is similar to the K-line February 8, 2001, and K-line today, the next day to close out the candle. After the market to new lows after the formation of the bottom of the stage

January 28, 2008. There is a first gap, followed by the second gap.
January 28, 2008, the main stock index fell two notches formed and fell again after the second covering the gap failed; the next day, the stock index to close positive. After the market to new lows. K line on January 28 of this year can be seen on June 25 - the 26th K-line combination.

August 31, 2009, stock index gapped fell, which is since 3478 a second upward gap; the next day, the stock index closing Yang and periodic bottom. After that, the main stock index covering the gap after the first double-dip recession. Analogy is, K-line August 31 and K-line today is similar.

May 17, 2010, stock index gapped fell, which since April 16 when the third gap; the next day, the stock index to close positive. Then, after the main stock index bottomed out only after the cabinet finishing.

Hammertime.
In June 2013, "money shortage" caused the stock market crash, K Line and June 25th this year on June 24 that year - the 26th combined K similar line; the next day, the stock index deep V reversed, and the formation of the early bull market The important bottom.

Finally here's Shanghai and the ChiNext today.

The ChiNext is busted. The old trend is now resistance. For the Shanghai Comp, the author of the above thinks the neckline will hold.

iFeng: 大盘暴跌!别慌!8张图让你看清上证指数和创业板!

Bonus: Where to hide? At the bottom of the bottle.

2015-06-26

China Listens to U.S.; Stops Intervening in Currency Market, Yuan Falls

Bloomberg: Yuan in Hong Kong Drops as China Pledges to Limit Intervention
The yuan traded in Hong Kong fell to a one-week low after China committed to limiting foreign-exchange intervention as it concluded an annual dialog with the U.S.

The Asian nation said it will move to a more flexible, market-based currency while pledging to make its exchange-rate policies more transparent as officials wrapped up diplomatic and economic talks. China will “steadily” increase the yuan’s convertibility as it bolsters the case for it to be included in the International Monetary Fund’s reserve-currency basket, a deputy governor of the People’s Bank of China said Friday.

“The pledge of less intervention makes investors pessimistic because they expected the PBOC to support the yuan as the economy is slowing,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. “But making the yuan a reserve currency is still the priority for China, so it won’t let it fall sharply this year.”
The best strategy for the U.S. here would be to require greater convertibility as a prerequisite for entering the SDR. If China balks, it's several more years before China is in the SDR. If China agrees, they'll have to deal with heightened risk of capital outflows.

Christopher Balding notes:
“Yet the PBoC has also indicated that its vision of “convertibility” does not involve the kind of unrestricted capital flows that wreaked havoc on emerging markets during the 1998 Asian financial crisis and again during the global financial crisis in 2008. “The capital account convertibility China is seeking to achieve is not based on the traditional concept of being fully or freely convertible,” PBoC governor Zhou Xiaochuan told the IMF in April.”

The IMF for all the Ivy League Phds should return to Economics 101 about what constitutes a freely tradable currency and its importance for being a reserve currency.

Hope For Central Bank Action in June Fades

Bloomberg: China Money Rate Advances for Fourth Week as Lenders Hoard Cash
China’s benchmark money-market rate climbed for the fourth week in a row as lenders held on to cash to meet official requirements and demand for funds surged due to municipal bond sales.

The shortage prompted the central bank to add money to the financial system by auctioning reverse-repurchase contracts for the first time in two months on Thursday. The People’s Bank of China didn’t pull funds this week and injected more than 30 billion yuan ($4.8 billion) to lenders in targeted reserve repos, according to separate people familiar with the matters. Money rates have risen every June in the past decade as lenders look to satisfy regulatory checks and companies pay tax.

Hellenic Shipping News: PBOC Cash Injection May Dim Hopes for Stronger Easing
The central bank’s move is meant to quench banks’ seasonal thirst for funds. But resorting to liquidity adjustments in the money market likely diminishes the chances of imminent, more-forceful monetary policy easing such as cutting banks’ reserve requirements, analysts say.

Some thing the window for a rate cut is still open because the central bank may want to act early in Q3 to spur the economy. iFeng: 时隔两月多央行重启逆回购 专家:近一两周仍是降准窗口

The Best Regulator Is the Market: Levered Traders Torched


Lending outside of brokerages is the main driver of excessive leverage. Investors can only lever up 2:1 with their broker, but not a few investors in China are levered 5:1. They take out loans to reach the ¥500,000 in capital needed to qualify for broker margin, or layer outside margin on top of their main account.

FT: Shadow lending crackdown looms over China’s stock market
A universe of so called “fund matching” companies, known in Chinese as peizi, has sprung up over the past year to provide margin funding to virtually anyone who asks. Officially registered as consulting companies, these groups also subscribe to the subordinate tranche of umbrella trusts.

After opening a securities account at a brokerage, fund-matching companies use a software program produced by Shanghai-listed Hundsun Technologies — controlled by Alibaba founder Jack Ma — to divide the account into multiple sub-accounts that enable peizi clients to trade independently. The peizi company, as the official account holder, maintains ultimate control and can liquidate any sub-account if the investor racks up heavy losses.

In mid-April China’s securities regulator told brokerages to stop working with umbrella trusts. On June 13, a Saturday, the agency followed up with rules explicitly forbidding them to co-operate with fund-matching companies by offering them direct access to their electronic trading systems. The country’s stock markets began their tumble the following Monday.

Market participants say peizi companies are continuing to operate, but that the scale of funds and degree of leverage is significantly reduced.
And down goes the stock market.

Reuters: China stock regulator says market fall reversing excessive gains
China's securities regulator said on Friday that recent falls in Chinese stock markets were just reversing unwarranted gains after a strong run-up and that the economy was showing clearer signs of stabilizing despite the fall.

"It's a self-adjustment of the market after earlier excessive gains," the China Securities Regulatory Commission's spokesperson Zhang Xiaojun said at the regulator's weekly news briefing.

"Recently, there has been more volatility in the stock market. That requires all sides to treat it rationally."

iFeng: 证监会:市场下跌是自然调整 三因素有利于激发市场
Zhang Xiaojun also said that the Commission recently adopted a series of optimization margin activities in order to achieve a counter-cyclical regulation, will help to maintain long-term stable operation of the market, the Commission shall perform the regulatory functions will continue to crack down on insider trading, market manipulation rights violations against the investment, the reduction of provisions for breach of promise of major shareholders behavior against the law. Zhang Xiaojun also reminded investors to not be gullible, not follow blindly, to jointly promote the stable development of the stock market.

Is this a sign the bottom is near? iFeng: 分析:周末若无重磅救市措施 下周直奔4000关口
Without major rescue measures this weeked, straight to 4000 points next week!

Yes, you're a witness to history: This is the crash! This is the crash! ! More than two thousand stocks hit bottom, unprecedented!
The article goes into a long discussion of factors affecting the market, central bank policy, IPOs, etc.

An investor poll in iFeng with more than 200k respondents: 沪指再度重挫7% 现在能抄底么

Finally, the reasons why the market dropped. iFeng: A股重挫8%幕后六大黑手曝光 机构称或调整50%

1. 90 billion yuan flows out of A-shares
2. Two days of selling through the Shanghai Connect
3. Market tumbled in the last 15 minutes of trading on Thursday
4. Morgan Stanley said do not buy the dip
5. UK strategist says Chinese market will fall 50%
6. Official media stopped rebutting foreign media crash talk, simply repeated the "slow bull" argument
7. PBOC restarting of reverse repos lowers odds of a rate or RRR cut
8. Regulators continue to cut leverage
9. Technical analysis pointed to a decline

Liaoning Housing Market Declines, All Rescue Efforts Fail

Recently Liaoning launched a 5-part plan to rescue the housing market. Liaoning has been a subject here several times due to the major slowdown in the local economy, which manifested in a collapse in real estate investment in late 2014 and has continued contracting in 2015.

The latest 5-part plan follows a 9-part plan from April that failed to stimulate demand.
April 8 this year, the provincial government released nine measures to stabilize housing demand (hereinafter referred to as "Liao 9"), the minimum down payment ratio and personal housing accumulation fund loans adjusted to 20%, while in turn transferred the 800,000 line of credit on top Yuan.

"Liao 9 introduction, Liaoning deal on the property market in local rise, coupled with this year in April and May the national property market to pick up, a number of projects in some cities of the province there 'hot', but with the rest of the red in May compared to most cities in Liaoning transaction data is still not ideal. "Liu Jing said.

In the capital city of Shenyang for example, statistical data local official website show that in May, Shenyang real estate transactions in the area of ​​1.146 million square meters, down 12.74%, of which commercial residential area of ​​1,044,000 square meters, a decline of 10.14%.

For this reason, most large development companies have slowed the pace of investment, and project planning has to be adjusted.

"At present, Shenyang, Dalian, Yingkou and other places, there was greater area of ​​downtime phenomenon. Many developers fear built a house can not be sold, it is the first to subscribe. Subscription was better to start, if the situation is not good Subscription left off." Liaoning A local developer told reporters.

Turnover in the doldrums, investment slowdown will undoubtedly make local government "headache" and the amount of days inventory is one of the biggest problems facing the real estate market in Liaoning.

According to public data, Shenyang currently has 27,966,000 square meters of houses for sale, Dalian, there are 15 million square meters of inventory capping; Yingkou potential supply in 2012 had reached 13,626,700 square meters, less the last two years in spite of new real estate, but the deal has been in the doldrums ; Fuxin City, as of May 25, there are 57,084 units for sale in the state.

"On one hand the overall real estate development in Shenyang large body, the hands of developers more land reserves, higher housing stock; on the other hand, the current Shenyang proportion of owner-occupied housing groups about 80%, the overall property market demand is weak," a local Liaoning people in the industry said.
Does Yingkou ring a bell? In Yingkou, Liaoning Unfinished Buildings Stretch For 50 Square Kilometers; Real Estate Graveyard

It's game over for the development model. There was overbuilding post-2008, the youth are moving away (or were never born), the buildings are empty, massive investment is needed to build infrastructure around the empty housing to give it a chance at being viable, but the land finance model is past.
"Although so far this year in March, the central and local Liaoning repeatedly introduced stimulus, however, over the real estate market development, population exodus and aging of the population has led to Liaoning Transaction weak, the market is expected to continue down a series of problems." An industry Analysts pointed out.

"Four trillion by land finance and policy driven, three-year investment in Liaoning Province in 2008 after strong, have voted to build around the zone, but the last two zone residential occupancy rate is very low, many buildings vacant." Liu Jing told reporter.

According to media reports, a deputy director of the Development Zone in Liaoning has said, the zone more land, land sales in the previous decade between climbing, but the corresponding infrastructure from scratch, but also the huge investment, land finance model increasingly difficult.

"Over the last two years, the annual net inflow of Liaoning Province, only 20 million of the amount, the data compared with five years ago, almost half less, while the case is still increasing exodus of young." The Liaoning local industry analysis.

iFeng: 辽宁再发“辽5条”救市 多轮刺激政策仍难挽颓势

Jiangsu Bond Drop Again

2015-06-25

Limit Down on the ChiNext?

Down 8% currently, will foreigners step in and rescue the market again? Shanghai currently off almost 5%.

Jiangsu Munis Drop Again

These bonds were sold 1 month ago at par, with a 3.41% coupon. YTM is now 3.96%.

Keep Your Eye on the ChiNext

In the last post, there were charts showing the market has a ways to go if 2007 is a viable analogue.

The ChiNext, on the other hand, continues to look toppy:

H / A Share Discounts for 2015-06-26


Chinese Start Looking for the Top in A-Shares

History repeats or at least rhymes? Here's a chart making the rounds today. The blue line is the market since 2001, the red line is since 2009. iFeng: 六大利好集体失效 A股尾盘黑色17分钟真相揭秘

Also this chart, China's GDP growth on the right (red bars), import growth from the 4 largest trading partners on the left (blue line).

Here's a chart of A-shares to GDP ratio. The red line is the average, the other bars show a standard deviation, with the current market valued at 1 standard deviation above the historical average. This is due to the banks stocks and some SOEs still having low valuations. Were they to join in the rally, a full repeat of the 2007 surge could unfold.

If the market follows the 2007 model, it will peak in Q4.
As the above analysis pointed out that if history repeats itself, the current upward move to maintain the time and the great bull market in 2007 similar to, meaning since the upward move since last year, have a chance to peak around the fourth quarter. In fact, it seems quite reasonable, because according to the current A-share market capitalization to GDP ratio increased velocity estimation [4], at the end of the year, the ratio will rise to higher than two standard deviations above the median, which means when the The valuation has become extremely expensive side, if and when the economy is still no significant improvement in earnings performance, A shares upward move will most likely meet top.

Chinese Growth Target Is Kinda Sorta 7%, But Not Really; PBOC Waits

ECNS: Growth does not have to reach 7%
China's GDP growth does not have to reach 7 percent this year, financial news portal wallstreetcn.com reported Wednesday citing Finance Minister Lou Jiwei, who also said that the current growth is "within a reasonable range."
iFeng: 楼继伟:中国经济增速目标并非必须超7%

The central bank is also in wait and see mode, with no cuts coming this month.

June 23, continuing silence on the open market operations. So far, the central bank has suspended more than a month reverse repo operations on the open market. In addition to reverse repurchase pause, it is learned, shortly before the central bank to some institutions were directed repurchase. At the central bank continue to be suspended while the reverse repo, the recent trends and the future of monetary policy operations, the market there is disagreement on the expectations.

"The current market is part of the agency is expected shortly RRR rate cut is also possible; There agency believes that in view of the economy is stabilizing and gradually force the early policy years, monetary policy will likely remain stable, will be targeted mainly addition delivery Some analysts expect the current monetary policy is in a wait period, whether to sell, how to sell, but also depends on the real economy, depending on the situation. "Analysts from Hua Securities, said," I personally prefer the third point of view. "

...Zhao Qingming, an international financial expert said: "probably no big moves in the near future, no interest rate or RRR cuts this month... May the main macro data, the economy showed signs of stabilization, the central bank may continue to observe the early effects of policy measures. on market expectations of RRR, the current ample liquidity in the banking system, the lack of drop quasi urgency. Of course, there are still three quarters to cut interest rates, lowering the possibility of quasi-total point of view, we expect interest rates have come to an end, at least the second half of a rate cut might exist."

...Wen Bin said that after two "comprehensive orientation" RRR, easing liquidity of the financial system, increasing the excess reserves of commercial banks; May trade surplus widened to nearly 60 billion US dollars , foreign exchange increased, which will squeeze further RRR space. However, in the long run, with the Federal Reserve at the end of the third quarter or early fourth quarter point rate hike and China ushered in a further increase of capital account liberalization efforts, pressure net outflow of domestic funds may be larger, which means that RRR operations still further release liquidity.

iFeng: 央行主管报纸刊文:本月已无降息和降准可能

The Price of Growth

Caixin: Children of Migrant Parents Left Alone to Die
Police said the four children – a 14-year-old boy and his three sisters ages 10, eight and five – committed suicide together on the night of June 9 in their home in Tiankan, a town in a farming area under the jurisdiction of the Guizhou Province city of Bijie, in the southwestern part of the country. Bijie police said the children killed themselves by drinking pesticide.

..."Increasing numbers of rural people are leaving home for a better life," said Wu Zhihui, director of the Rural Education Institution at Beijing Normal University. "But their children are being sacrificed."

Zhang wrote a suicide note that read: "Thanks for your good intentions. I know you are good to me, but it is time for me to go. I swore I would not live beyond 15 years old, and death has been my dream for years."

...The tragedy is the area's second since 2012 involving the deaths of neglected children. That winter, five young boys died in the village of Qiangyan while trying to stay warm after crawling into a garbage container and starting a fire.

Loan to Deposit Ratio Gone

SCMP: China to scrap loan-to-deposit ratio requirement for commercial banks
Beijing plans to scrap the loan-to-deposit ratio for mainland China's commercial banks in yet another bold move to overhaul the sector and bolster lending as economic growth slows.

The State Council said on Wednesday that it had approved a draft amendment to the 20-year-old commercial banking law that would end a cap on banks lending a maximum of 75 per cent of their deposits.
This change will kick in once lending picks up. Until then, it will have limited to no effect on lending.

Beijing Home Sales Jump 173% YoY Over Dragon Boat Holiday

New home sales were up 218% and exceed 2013 levels as well.
Prices are up 10% yoy.

So much for the slowdown.
iFeng: 端午北京楼市成交同比涨173% 大兴通州居前两位

Equities More Volatile Than Homes, But Less Leveraged

Some nuggets from an article on investing in iFeng:

Since July 1991 there have been 22 weeks with 10% drops in Chinese equities. Of these, 14 took place before 1995 and only 5 since 1996, with 3 occurring in 2008. The main reason for the drop in volatility was the introduction of the 10% daily limit on stock price fluctuation. Homes are less volatile due to much less frequent transactions.

As for the impact of taxation on the lever and a market, stock market investors are not yet fully clear, take the Chinese real estate market, their down payment ratio of 20 percent are not unusual (equivalent to five times the leverage), and most people mainly rely on loans to buy a house, even a "zero down payment" (Leveraged 100%). In addition, prices rose rapidly, the government on the real estate market trading links has repeatedly increase taxes. In this case, the prices are not because of the leverage and taxation issues caused by excessive market fears, but there was a wave of higher housing prices rose, leading the government had introduced the "restriction", "limit" and other measures .

In 2012, the average professional investor held shares for 143 days, versus 45 for the average investor...
Thus caught in a vicious circle: the shorter the holding period the greater the risk, the greater the risk, the shorter holding time.

In view of this, retail investors in the stock market who study the real economy are making a big fuss over a small thing, besides, those who are very professional and institutional investors, are not leaving the Chinese stock market due to slowing economic growth.

iFeng: 为啥中国房子比股市抗跌?原因被一语道破

2015-06-24

17 SOEs Targeted in Round 2 of Anti-Corruption Campaign

This is 26 units, there are seven party and government institutions, are central Taiwan Work Office, directly under the Central Government Offices Administration, Ministry of Transport, the State Government Offices Administration of the State Railway Administration, China Civil Aviation Administration, as well as poverty alleviation and development of the State Council Leading Group Office.

Another two media organizations, namely the People's Daily and Qiushi, they are institutions directly under the CPC Central Committee.

The remaining 17 units are central enterprises, namely Air China, China Eastern Airlines Group, Hong Kong China Travel Service Group Company, China Merchants Group Limited, China Aerospace Science and Technology Group Corporation, China Aerospace Science and Industry Corporation, China Aviation Industry Corporation, China North Industries Group Corporation, China North Industries Group Corporation, China Commercial Aircraft Co., Ltd., China Resources Co., Ltd., Anshan Iron and Steel Group Corporation, China Aluminum Corporation, China First Heavy Machinery Group Corporation, Harbin Electric company, China Post Group Corporation, China Railway Company.

iFeng: 今年中央第二轮巡视锁定26家单位 涵17家央企(名单)

TPP Aims to Slow China's Growth Rate

Exactly the strategy outlined in Luttwak's The Rise of China vs. the Logic of Strategy

WSJ: Fabric of a Trade Deal: U.S. Asks Vietnam to Cut Out Chinese Textiles
To that end, American trade negotiators are demanding that Vietnam, a major garments exporter, reduce its reliance on textiles made in China, which isn’t part of the trade pact, to get preferential market access to the U.S.

The goal is to create new markets in Vietnam for the U.S. textile industry, which employs a quarter of a million Americans and exported $20 billion last year.

“The U.S. and Mexico are especially large textile producers,” said Eliza Levy, a spokeswoman for the National Council of Textile Organizations. “Vietnam would simply have to shift its sourcing of yarns and fabrics from China to the U.S. and Mexico.”

...U.S. fashion brands oppose this approach, which they say ignores the complexities of global supply chains. Vietnam is the second-largest exporter of apparel and footwear to the U.S., behind China, with $13.1 billion in sales last year. But the country only produces enough fabric to meet a fifth of its needs and buys about $4.7 billion worth from China, or about half its total annual imports.
They'll adapt to new complexities.

Uncontrolled Thermonuclear Explosion Responsible for Warming and Cooling

Guardian: Weak sun could offset some global warming in Europe and US – study
Global warming in northern Europe and the eastern US could be partially offset in future winters because of the sun entering a weaker cycle similar to the one which enabled frost fairs to take place on the river Thames in the 17th and 18th century, according to new research.

However, the study said any potential weakening in solar activity would have only a small effect on temperature rises at a worldwide level, delaying the warming caused by emissions from cars, factories and power plants by around two years.
The fighting withdrawal begins.
Globally, a grand solar minimum would reduce temperatures by just 0.1C between 2050 and 2099. Manmade climate change, by contrast, is expected to bring temperature rises of up to 6.6C in the same period if drastic action is not taken to cut carbon emissions.
There's a high probability of at least 0.1C cooling if the astrophysicists are right and possibly more if the more dire solar cycle forecasts are correct. Climate computer model forecasts haven't had predictive success yet. And cooling is far more dangerous than warming.

Year Without a Summer
The year 1816 is known as the Year Without a Summer (also the Poverty Year, the Summer that Never Was, Year There Was No Summer, and Eighteen Hundred and Froze to Death[1]), because of severe climate abnormalities that caused average global temperatures to decrease by 0.4–0.7 °C (0.7–1.3 °F).

Evidence suggests the anomaly was predominantly a volcanic winter event caused by the massive 1815 eruption of Mount Tambora in the Dutch East Indies (Indonesia), the largest eruption in at least 1,300 years. The Earth had already been in a centuries-long period, since the 14th century, of global cooling known today as the Little Ice Age, which itself caused considerable agricultural distress in Europe as a whole during its onset; the Little Ice Age's existing cooling was solely as a potentially aggravating factor, as the eruption of Tambora occurred during the Little Ice Age's concluding decades.
If the Sun were to enter another long cycle of weaker output, carbon levels might start falling to dangerously low levels, threatening plant survival (on a windless day, a cornfield will consume 50% of the available CO2). Scientists in 50 or 100 years may be worried about mass plant extinction and the need to pump CO2 into the atmosphere. They might advocate drilling oil wells and setting them on fire. No more insane (from today's perspective) than their plan to pour coal all over the South Pole in the 1970s in order to heat the planet and melt the ice cap.

Newsweek Global Cooling

H / A Share Discount List for 2015-06-25


Bloomberg Checks Up on Tianjin's Manhattan

Bloomberg: Succeed, or Crash and Burn?
If it comes off, Tianjin’s Manhattan project will become the latest illustration of China’s build-it-and-they-will-come approach to development. Pudong -- the futuristic financial center that sprang up on Shanghai’s east bank in the 1990s -- also had its doubters. Occupancy rates in its central Lujiazui area are 97 percent and rents among the world’s priciest.

“A 7 percent growth rate, like China’s, means a lot of things that look strange today look less so tomorrow,” David Carbon, managing director at DBS Group Holdings Ltd. for economic and currency research, wrote in a report this month. “Roads always go nowhere when you build them. It’s what happens later that counts.”

China Slowdown Has Barely Begun

The slowdown in China's economy first caused great pain for iron ore miners and steelmakers. These industries are in the higher stages of production and are typically the first to be affected by an economic slowdown.
This is also happening inside of China, as I discussed last year in Liaoning Sounds Warning on Chinese Economy. I warned that the slowdown in Liaoning province may not have been an isolated slowdown, but the early stages of a larger downturn in the business cycle.


Now the slowdown is moving to the right, into capital goods.

Bloomberg: The World's Biggest Economies Are About to Feel the Impact of China's Slowdown
Emerging markets and commodity suppliers have grappled with reduced demand from China as a property downturn weighed on the world's second-largest economy.

U.S., Japanese and German exporters did better, supplying capital goods like machines that China still demanded. That may soon change, according to a study of global exposure to China by UBS Group AG economists Donna Kwok, Wang Tao and Jennifer Zhong.

"As the multiyear Chinese property downshift continues to unfold beyond this year, we may see a longer-term decline in China's appetite for foreign industrial imports,'' the analysts wrote in a report June 22. "Commodity, reprocessing, and developed country exporters alike should brace themselves for the impact of weakening China demand this year, irrespective of whether U.S. or EU imports pick up.''
This slowdown or rebalancing, however you choose to view it, is still in the early stages.

Interbank Market Tight Heading Into End of First Half

Rising yields in the interbank market reflect market mood amid a policy vacuum at the year end cash crunch arrives once more. The end of the IPO freeze has freed up capital, but it did not counteract the market's desire for higher yields yet and may take time to flow back into the market. Traders are also more cautious following the small uptick in the flash PMI for June.

Source: 央行宽松落空令银行间债市承压 月末资金偏紧

Long-term policy is also working to pull bond yields higher.

ZH: Confusion Reigns At PBoC As Multi-Trillion Yuan Bailout Threatens To Undermine Rate Cuts
This also serves to underscore what we said last month: because the central government is ultimately responsible for guaranteeing local government debt, and because yields on the new muni bonds are so close to those on treasurys, the newly issued local government bonds are really just treasury bonds, meaning that, in essence, the supply of Chinese government bonds is set to jump by CNY2 trillion in the coming months. If all of the local government debt ends up being refinanced, the end result will be the equivalent on CNY20 trillion in additional treasury supply.

Wealth Effect Limited, Home Price Rise Will Slow

This opinion piece argues that the May surge in first-tier home prices will no be sustained.

The surge of home buying in May, which propelled Shenzhen prices to their biggest one month gain (perhaps the largest in history), up 6.6%, has ebbed in June. First-tier city sales fell 23% in the first week of June and only rebounded 6.4% in the second week, according to China Index Academy. Price follows volume...

The drop in the stock market will slow the wealth effect and a "slow bull" market will keep the wealth effect from exploding higher again. Instead, easy money and a good balance between supply and demand will =lead to a stable rise in first-tier city home prices.

iFeng: 财富效应减退 一线楼市下半年房价难再狂飙

In general, sales are rising in June versus last year though, with some cities up more than 200%.

Specific urban look, Qingdao, the largest volume increase in the chain, 47 percent, and Qingdao, the market volume is relatively low in May, the price of local housing enterprises active strategy use and other factors; MoM increase Wenzhou, Shenzhen and other cities are more large, the chain increased 44% and 35%, which the city and these recent gains in housing prices greater relationship.

See an increase from 20 cities in the 17 cities that is ninety percent volume rise. Among them, the biggest increase in three cities of Shenzhen, Wenzhou and Yangzhou, respectively, an increase of 287%, 276% and 224%. 20 cities, three cities in the fell, namely Changsha, Hefei and Putian, a decrease of 5%, 23% and 25%.

iFeng: 6月份楼市整体向好 成交量同比或增长六成

Jiangsu Muni Update

The buyer has moved their bid up from ¥68 to ¥77 for the bonds today, but still a long way from an trade based on the current book.

2015-06-23

Stock Market Tumbles, What Does Govt Think?

Liu Shan asks, what does the government think of the plunge in stock prices?

Regarding the slow bull market, people say the securities regulator is responsible for slow, the PBOC for bull. Now the regulators have completed the slow part, but the PBOC hasn't completed the bull part.

Shan says the PBOC can cut the RRR to boost liquidity. It can also push liquidity into the bond market, where short-term corporate bonds are still trading above long-term loan rates:
As the third phase of short-term bonds June 19 traded Chemical Co., Ltd. Shandong Jade year 2015, the rating A-1, duration of 366 days, annual interest rate of 6%. China National Gold Group Corporation 2015 second tranche of medium-term notes, rated AAA, APR 5.29. Look from the bank lending rates, a five-year lending rate to 5.50 percent, more than five years of 5.65%. Compared the two, the high cost of debt financing, bond financing will inevitably suppress traditional industries initiative.
The PBOC can twist too:
In addition, the central bank will take "Operation Twist", improve short-term financing costs, lower long-term yields. Reduce short-term liquidity supply, causing a leveraged effect in the stock market. Stock market crash, the central bank has reached the desired effect.
Now the bank can hike short-term rates and lower long-term rates, creating a bull market in long-term bonds.

iFeng: 第77期:股市暴跌政府在想什么

If China's central bank starts deciding policy based on the stock and bond markets, disaster is guaranteed.