Deleveraging Deflates Real Estate Financing

A bump in SOE and local government financing will be needed to offset the slowdown in real estate financing this month, or China will not hit credit growth targets.

iFeng: 房企融资遭遇“黑五月” 40家房企融资骤降52.07%
After changing the previous loose expectations, the housing financing environment has tightened again in the near future. In May, the housing financing quota fell by more than 50%, and the housing enterprises encountered financing “black May”.

The official also issued a policy to tighten housing financing. Some experts predict that the tightening of housing financing in the future is a general trend. For some high-turning housing enterprises, the capital situation will be more severe, and the possibility of capital chain breakage should be prevented.
Corporate finance plummeted by 50% in May

After a slight decline in April, the amount of financing continued to fall sharply in May. According to the data provided by the same policy research institute, in May 2019, the total financing of 40 typical listed real estate enterprises totaled 36.799 billion yuan. Compared with April, the total financing decreased by 52.07%, setting a new low since 2019.

The good days that the housing companies are expecting have not yet had time to start, they have been annihilated by the small flames they are expecting. Zhu Lili, a researcher at the same policy institute, believes that with the introduction of the regulatory policies of the regulatory authorities in May, the policy tightening trend is obvious, which in turn affects the difficulty of overseas financing of housing enterprises.

Corporate bonds and other debt financing have always been the two most important channels for housing financing. In May, these two “life-saving pills” failed at the same time. Specifically, in terms of trust loans, a total of 4 trust loan financings were monitored in May, with a total financing of 10 billion yuan, up 32.76% from the 7.537 billion yuan in April. The largest one was China Merchants Shekou to China Resources. Shen Guotou Trust Co., Ltd. applied for a renewable trust loan of 7 billion yuan; in terms of corporate bonds, only 6 corporate bonds occurred in May, a total of 9.585 billion yuan, a significant drop of 79.74% from April's 47.313 billion yuan. Two of the six corporate bonds were issued US dollar bonds, totaling 450 million US dollars, equivalent to RMB 3.105 billion; in terms of domestic bank loans, the financing amount in May was 7.769 billion yuan, a sharp increase from the 3.221 billion yuan in April. %; In other debt financing, the total financing amount in May was 5.313 billion yuan, a sharp drop of 50.54% compared with April 10.743 billion yuan; in terms of equity financing, the financing amount in May was 4.132 billion yuan, accounting for 11.23% of the total financing amount, which was down from the previous month. 36.96%; In addition, no mid-term notes, overseas syndicated loans, and entrusted loans occurred in May.

In contrast, the financing cost in May was lower, and the basic control was within 6.5%. Among the disclosed data, the lowest financing cost is Guangzhou City Construction Development Co., Ltd. 2019 public housing lease special corporate bonds (the first phase), the issuance scale of 1.5 billion yuan, the coupon rate of 3.83%; followed by its issuance Guangzhou Urban Construction and Development Co., Ltd. publicly issued corporate bonds (first phase) for qualified investors in 2019, with a scale of 1.95 billion yuan and a coupon rate of 3.85%. The highest financing cost is that Xincheng Global, an overseas subsidiary of Metro Holdings, has completed the issuance of unsecured fixed-rate bonds with a total amount of US$300 million overseas, with a coupon rate of 6.5%.

For the performance of housing financing in May, Zhang Hongwei, chief analyst of Tongce Group, believes that the source of the suspension of bond issuance comes from the “abnormality” of recent housing and land markets. In March and April, the land market was too hot. If there is no supervision, there is risk in the market. It is expected that the housing financing will be slightly tightened later.

Duan Yutong, an analyst at Zhuge Fangfang Data Research Center, told the China Times reporter that the intensive financing of the past period has led to a marked acceleration in the acquisition of land. The resulting land price rises and the upward trend of house prices reappears, and the tightening of financing supervision is obvious. At present, the overall real estate policy regulation direction is still based on "stable". In order to stabilize market expectations and achieve the goal of "stable price, stable price, stable expectations" and avoid excessive market temperature, the overall financing trend is declining.
Zhang Dawei, chief analyst of Zhongyuan Real Estate, believes that from the perspective of the property market regulation policy, the overall real estate policy regulation direction is still “small spring”, but “in summer” will inevitably be suppressed, and the policy will insist on “patching and playing the hamster." Financing supervision has begun to appear, and it is expected that financing will continue to tighten and decrease in June compared to May.
iFeng: 五月楼市数据透视: 销售继续筑底,房企过“紧日子”
The indicators may continue to fall back

The decline in sales has also affected the financial situation of housing companies. In the first five months of this year, the real estate development enterprises had a capital of 66.689 billion yuan, a year-on-year increase of 7.6%, and the growth rate dropped by 1.3 percentage points from January to April. Among them, the growth rate of deposits and pre-sales and personal mortgage loans decreased compared with the previous April.

In the financing market, housing companies have also encountered certain difficulties, which has made the company's capital chain worse.

According to the data of the same policy research institute, in May, the financing amount of 40 typical listed real estate enterprises was 36.799 billion yuan, a decrease of 52.07% from the previous month, a record low of nearly one year. Among them, corporate bonds totaled 9.585 billion yuan, a significant drop of 79.74% from the previous year's 47.313 billion yuan. Foreign currency financing also plummeted 93.82%.

A housing company in Beijing told the 21st Century Business Herald that the tightening of financing policies is a continuation of the property market regulation policy triggered by Xiaoyangchun in March. He said that since April, the funds of both real estate and homebuyers have been tightened, and the National Banking and Insurance Bureau has issued penalties for illegal lending to real estate. At the end of May, the regulatory authorities also revealed that some housing companies will be tightened to open market financing, including bonds and ABS products.

The person said that due to the bad environment, various housing companies have generally passed the "tight days." For example, at the beginning of the year, the headquarters gave local companies the authorization to get a relatively rich budget, but it is still strictly controlled for high-priced land, and will give up decisively once the authorized price is exceeded.

Since mid-May, many housing companies including China Merchants Shekou, Jianye, Jinmao, etc. have released project transfer information due to excessive prices or insufficient project profitability.

For the future market trend, most of the respondents believe that “regulation will be due to urban policies and the market will fall back smoothly” will be the main trend.

The aforementioned housing enterprises said that some areas have been loosened and regulated in the near future. However, in general, whether the Suzhou regulation and control plan or the long-term mechanism such as market warning has begun to operate, both the central and local governments have left behind. Once the market changes again, the regulatory policy will move by the camera, thus stabilizing the market.

Yan Yuejin pointed out that under the background of housing and non-speculation, it is expected that the national regulation and control policy will not be relaxed in the short term, and the growth rate of commercial housing transaction area will continue to remain flat or decline in the next few months. Affected by this, the capital pressure of real estate enterprises is still relatively large, and the enthusiasm for starting the land is difficult to rebound rapidly. Therefore, the growth rate of real estate development investment in the country will continue to fall.

Zhongtai Securities believes that the key first- and second-tier property markets will continue to remain stable in the future, while the third- and fourth-tier property markets will tend to fall, resulting in a decline in national sales data. Under the current tightening of the financing environment, the heat of the land market is expected to decline, and the growth rate of real estate investment will also decline.
iFeng: 楼市拐点来了?这三大“风向标”城市5月集体降温
"Red May" is not red?

In May, the overall turnover of the national property market was not strong enough, and there was no rebound in March and April. It is roughly due to the following two reasons:

1, the intensity of regulation is not reduced

According to the statistics of the Central Plains Real Estate Research Center, in May, the local authorities, including the ministries and commissions, have adjusted 41 measures for real estate. Although less than 60 times in April, real estate control policies for two consecutive months are in a period of policy-intensive release. The precise regulation of various places has effectively stabilized the property market.

2, inventory pressure is not small

At present, among the 100 large and medium-sized cities in China, the property market inventories have increased year-on-year, especially in the third- and fourth-tier cities.

Among them, the supply of new discs in first-tier cities increased, and the inventory rebounded significantly. Inventories in third- and fourth-tier cities have been in the process of climbing. According to statistics, since November 2018, the inventory of third- and fourth-tier cities has shown a continuous ring and positive growth year-on-year. The situation of oversupply has increased the pressure on third- and fourth-tier cities to destock.

It is undeniable that although “Red May” has failed, the market expectation has also changed, and the property market has also developed in a more stable direction, and house prices have become more rational.

With the fact that “households are not speculated”, the characteristics of “different city policy” are clear. I believe that in the future, more refined property market regulation policies will become mainstream, and house prices will be based on market changes and regulatory targets in a reasonable range. Internal fluctuations.

SOEs Taking Over Private Economy

Private companies are selling out to SOEs and becoming the second-largest shareholder. Some companies have immediate pressure such as debt troubles, but others are hoping to tap the power of the state.

21st Century: “控制权”转让乍热的秘密:纾困第二季国资角色悄然转变
Sogou: The Secret of "Control Right" Transfer: The Role of State-owned Assets Changed Quietly in the Second Season of Relief
Since the fourth quarter of last year, more and more listed companies led by local governments have been acquired, which indeed shows cross-regional characteristics. Through the data, the secret of off-site acquisition is gradually revealed.

For example, state-owned assets in central and western cities have acquired listed companies along the southeast coast. On the one hand, the purpose of bailing out listed companies is clear. On the other hand, it is a better way to revitalize and integrate local resources than relying solely on local platforms to revitalize assets by holding hands with listed platforms in active investment and financing areas.

Not to mention, many cities do not even have A-share companies, which are greatly hampered in the process of industrial integration.

The new trend is becoming clearer in another round of transfer of control rights of listed companies.

According to our reporter's understanding, in this wave of transfer of control rights, agreement transfer, agreement transfer+voting right entrustment and voting right entrustment have become the main methods, and new methods such as agreement transfer+voting right abandonment have emerged. In addition, judging from the nature of the transferee, compared with the fourth quarter of last year, the proportion of private enterprises selling is also increasing.

"The current market situation is different from last year. Many major shareholders of listed companies are not in such a hurry to resolve the risk of stock pledge, but they hope to introduce a powerful controlling shareholder with industrial synergy for the sake of the future of listed companies. The founders are willing to be second shareholders. " On June 14, an investment banker from a securities firm in Shenzhen told reporters in 21st century business herald.
In some cases a smaller, local govt backed SOE sells out to a larger SOE, but private companies are also giving up control:
Statistics from reporters in 21st century business herald show that in the past month, about 15 listed companies have issued suggestive announcements on the change of control rights, announcing the change of ownership of the largest shareholder. Among them, 9 listed companies are state-owned and 6 are private enterprises. Compared with the fourth quarter of last year, the proportion of private enterprises accepting control of listed companies has increased, and powerful parties such as Liu Yonghao and East China Medicine have also begun to make moves.
Typically, on June 14, Saifutian announced that the actual controller Cui Zhiqiang intends to transfer 16.73% of the controlling shareholder Wuxi Saifutian Steel Rope Co., Ltd. to Suzhou Tiankai Huirun Industrial Investment Partnership (hereinafter referred to as "Tiankai Huirun"), and entrust the voting rights corresponding to the remaining 50.19% of Wuxi Saifutian held by it to Tiankai Huirun. After the transfer is completed, Saifutian's actual controller will be changed from Cui Zhiqiang to no actual controller.

"At present, the company only knows that the other party takes control first. There is no clear plan. The company's management team is relatively stable." On June 14, Saifutian Securities Department told reporters in 21st century business herald that the new shareholders have a background in state-owned assets and are relatively strong.


Chinese Industrial Production Slumps

The slowdown in autos intensified, the slowdown in industrial robots slowed slightly. Real estate investment, fixed asset investment and retail sales are all consistent with a slowdown.
NBS releases


Smashing Trump in China

The new Cold War is not a self-propelled cycle yet, but it is slowly getting there.

ZH: Watch Chinese People Bash Trump Bobblehead With Hammer As A “Stress-Relief”

Social Mood Says Bear Market

Belief in witchcraft/superstition is a sign of negative mood.
LA Times: The working witches of Los Angeles just want you to be your best self
A 2017 survey from the Pew Research Center that examined New Age beliefs in America found that 40% of respondents believe in psychics and another 40% believe that inanimate objects like mountains and trees are imbued with spiritual energy.

It also found that 33% of Americans believe in reincarnation, 29% believe in astrology, and 60% say they hold at least one of these New Age beliefs.

Anecdotal evidence seems to indicate the number of people who call themselves witches is growing.

“Interest in witchcraft waxes and wanes, but it is waxing, again, particularly among young women,” says Helen Berger, a professor at Brandeis University who has been studying witches and pagans for 30 years.
When going through the list of trends including transgenderism, it is screaming negative mood. Many parallels with he 1970s and even Weimar Germany. Stocks and social mood will eventually converge at much lower levels, but stocks have a lot of decline ahead (in real terms) just to catch up with mood.

Socionomics Alert: China Gets Triggered Over Pig Comment

China had 5-minutes of hate after UBS' chief economist made a cheeky comment about African Swine Flu. Chinese then intentionally misinterpreted the comment and blew it up into an international incident.

This is the type of thing that occurs almost weekly on Twitter in the United States and also on Weibo/WeChat in China, where comments are taken out of context and blown up into 5-minutes of hate. Yet this wasn't a bunch of emotionally unstable Twitterati, it triggered financial professionals. The trade war is heating up and you can expect any minor incident, including throwaway comments on social media, to be blown out of proportion as global social mood begins its long descent.
A flippant reference to pigs in an inflation analysis by UBS Group AG's global chief economist has caused a furore in China, with some in the financial community rejecting UBS's apology and calling for a boycott.

Paul Donovan, global chief economist of the Swiss bank's wealth management department since 2016, said in a podcast that higher consumer prices due to sickness among pigs would matter to a Chinese pig.

"Does it matter? It matters if you are a Chinese pig. It matters if you like eating pork in China," he said in the podcast on Wednesday, the transcript of which was posted on UBS's official website and later taken down.

His comments caused a stir among Chinese finance professionals, who said they were "distasteful and racist".

It even drew the attention of an influential state tabloid, the Global Times, which said Chinese internet users were outraged by the language used in the analysis of consumer prices.

"We apologise unreservedly for any misunderstanding caused by these innocently intended comments by Paul Donovan," UBS said in a statement emailed to Reuters.
Global Times: Chinese netizens reject UBS apology after issuing a 'racist' report on China’s inflation

Logic of Strategy: Tourism Edition

AFR: Chinese tourism slowdown surprises Australia
Chinese tourists spend more in Australia too, as the cliché of tour groups chasing after a guide with a flag has given way to cashed-up young couples travelling independently.

However, the narrative that the boom is going to last forever is no longer accurate. China's economy is slowing and its middle-class consumers are becoming increasingly cautious when it comes to spending.

Many are rethinking expensive family holidays to long-haul destinations in favor of cheaper options closer to home such as Thailand and Japan, and popular new destinations in Cambodia and Indonesia. Fewer are visiting Australia to buy property.

But there are other dangers to Australia's reliance on Chinese tourists that go beyond economics. Beijing's decision last week to issue a travel warning to travelers visiting the United States shows it will not hesitate to use its tourists and students against countries it falls out with politically.
Nations should strive for independence, from Beijing and from Washington.


China Credit Growth Not Stimulative

Chinese credit growth ticked up slightly in May if looking at year-on-year single-month change. May 2018 saw 0.31 percent increase in M2, May 2019 0.34 percent. But the bump didn't offset April's larger drop. If credit stimulus is coming, it will be in June. That month is usually has the second fastest credit growth for the year after January as 2H investment plans get financed. A baseline growth rate would be about 1.6 percent increase in M2, so it will have to be something blowout to change the rolling 3-month trajectory.
Lending is going to increasingly unproductive uses. Caixin: China’s Credit Growth Edges Up in May
In May, banks made 1.18 trillion yuan in net new yuan loans, up from 1.02 trillion yuan in the previous month, according to the data. Of the 1.18 trillion yuan, 56.1%, or 662.5 billion yuan, went to the household sector, up from April’s 51.5%.
Also from Caixin: Sluggish Business Credit Demand Signals Need for Further Easing
With local governments likely to be constrained in their borrowing for the rest of this year, additional monetary easing will be needed to sustain credit growth and shore up economic growth, Palmas said in the note.
Interesting. Earlier today it was More Debt for Infrastructure in China

Local governments are constrained by debt levels and weakening real estate in third- and fourth-tier cities (See: Enshi, Hubei Bans Price Cuts), which hits land finance. Businesses aren't borrowing. Banks can't profitably lend to small business. Stimulus hope is rapidly running out of road.

CCI Says Sell

Last sell signal was May 1, buy was June 4. S&P 500, Dow, Nasdaq and Russell 2000 all same signal.
Energy bounce or collapse?

Enshi, Hubei Bans Price Cuts

As China loosens borrowing rules on local government borrowing, expect local governments to boost home prices in a bid to finance their borrowing with land sales.

iFeng: 罕见房价"止跌令"!已有城市管理断崖式降价
Sogou: Rare house price "stop falling order"! There is already a cliff-cutting price cut for city management
Although property transactions in some hot second-tier cities have been booming recently, transactions in some third-and fourth-tier cities have been sluggish and the pattern of property market differentiation has become more obvious. Under the pressure of decentralization, some buildings in some third-and fourth-tier cities have adopted price reduction and promotion measures, and some even upset market expectations due to excessive price reduction.

A few days ago, the Enshi Real Estate Association released the "Red Head" document of "Notice on Stabilizing the Price Warning of Enshi Real Estate Market", which investigated and verified the cliff-like price reduction problem that has been strongly reflected by the society, put forward early warning and corresponding rectification measures for 10 price reduction phenomena, and the HS also said that it would assist the competent authorities to carry out systematic restriction on the lower floor price of the record price and determine a benign price reduction range.

In response, a Chinese reporter from a securities firm called Enshi Housing and Construction Bureau to verify the case. The relevant person in charge said: "The housing price warning document of the City Housing Society is true. I have seen it. This was issued by the City Housing Society according to the market situation."

Industry insiders believe that Enshi City's current document reflects the guidance of stabilizing house prices, stabilizing expectations and stabilizing the market. The overall property market policy is mainly based on stability. Stability is actually a two-way adjustment. Excessive rise and fall in house prices are not allowed and should fluctuate within a reasonable range based on market planning and control objectives.

In addition, Enshi is located in the western part of Hubei Province and belongs to a typical third-and fourth-tier city. This restriction on price reduction is also considered to reflect the thinking of government departments to "support the market". Official data show that Enshi's GDP totaled 87.1 billion yuan in 2018, making it the only city and state in Hubei Province with less than 100 billion yuan. Last year, Enshi's GDP grew by 6.2%, also the lowest level in the province. Enshi City is one of the eight counties and cities under Enshi Prefecture and is also the seat of Enshi Prefecture government.

Enshi City in Hubei Releases House Price Stopping Order

A few days ago, the Enshi City Real Estate Association of Hubei Province released the "Red Head" document of "Notice on Stabilizing the Early Warning of Enshi Real Estate Market Price". The document pointed out that recently, with the gradual increase in the number of listed real estate projects, the gradual decrease in sales degeneracy, and the increase in sales pressure faced by various housing enterprises, various projects have adopted different sales methods and means. Among them, some real estate projects have taken drastic price reduction measures to promote sales. These measures have aroused widespread concern in society and have brought adverse effects to Enshi real estate market.

Recently, Enshi Housing Society organized relevant personnel to investigate and verify some real estate projects, reported relevant problems and put forward early warning in response to the problem of steep price cuts strongly reflected by the society.

Enshi Real Estate Association has listed 10 main manifestations of price reduction in some real estate projects:

1, high price filing, low price opening, a decrease of 800-1200 yuan per square meter

2. Pre-selling and selling by stages, with a price difference of 300-500 yuan per square meter

3. Failure to follow market rules for no reason resulted in a 200-500 yuan per square meter decline in the opening price.

4. Marking a low price to attract customers is actually a sales gimmick, which causes large fluctuations in the market and changes in purchase expectations.

5. Not pricing according to the law of cost and price, the comprehensive cost forms a huge contrast with the actual selling price, leaving an unsustainable development space for itself and going astray in development and sales.

6. Release low-price information in advance on the grounds of customer storage, or even charge deposit and card in disguised form without pre-sale certificate.

7. Cooperate with third parties to reduce prices by means of distribution, electricity sales, etc. Disrupt the market by reducing prices in disguised form in the form of project payment deduction room, internal welfare special price room, etc.

8. Selling at a sale price of 4,000-4,500 yuan per square meter, which has a negative impact on the whole market expectation.

9. improper sales means are adopted to arrange sales personnel to solicit customers outside other sales departments, which has extremely bad influence.

10. In violation of relevant regulations, the involved height of the floor was reduced to about 2.7 meters, laying hidden dangers of contradictions for late-stage home buyers.

In response, Enshi Real Estate Association issued warnings to enterprises with the above problems and phenomena, and requested relevant enterprises to take corrective measures to correct the current market disorder of malicious competition.

Specific measures include four:

1. Require all enterprises on sale to conduct self-examination and rectification

2. The HS will conduct special investigations and investigations on the invoiced buildings in the city and report the results of the investigations.

3. The HS will request the competent department of business to take relevant measures to curb the real estate that has caused serious market impact due to ineffective self-examination and correction.

4. The HS will assist the competent authorities to systematically restrict the lower limit of the filing price by dividing the land price and the location of each district, and determine a benign range of price reduction rates.

In addition, according to the surging news report, Zhou xing, president of Enshi real estate association, told reporters on the afternoon of the 10th that the notice was a self-discipline requirement within the association, calling on real estate development enterprises to consciously abide by relevant regulations and not to suddenly reduce the house price too low.

In response to the "Notice on Stabilizing Enshi Real Estate Market Price Warning" released by Enshi Housing Society via the Internet, the Chinese reporter of the securities firm called Enshi Housing and Construction Bureau to verify it. The relevant person in charge said: "The housing price warning document issued by Enshi Housing Society is true. I have read it. This was issued by Enshi Housing Society according to the market situation."

It is understood that Enshi City is the seat of the state government of Enshi Tujia and Miao Autonomous Prefecture (Enshi Prefecture for short), the political, economic, cultural center and transportation hub of the whole state. Enshi Prefecture is the only ethnic autonomous prefecture in Hubei Province. It is located in the southwest of Hubei Province. Enshi and Lichuan are two county-level cities and Jianshi, Badong, Xuanen, Xianfeng, Laifeng and Hefeng are six counties in the state. According to statistics of Guosheng Securities, Enshi Prefecture had 3.361 million permanent residents in 2017, with an average annual growth rate of 0.4% in the past three years. GDP in 2018 was 87.1 billion yuan, with a growth rate of only 6.2%, the lowest in the province.

Enshi's Order to Stop Falling Reflects the Signal of Stabilizing House Prices

Zhang Dawei, chief analyst of Centaline Real Estate, pointed out that Enshi is only a representative of an underdeveloped city in the country. Enshi belongs to a relatively backward region in the third and fourth tier cities and has a certain degree of dependence on real estate. However, Enshi is not the first city to issue a stop-fall order. Previously, the Ganxian District Housing and Construction Bureau of Ganzhou City, Jiangxi Province also issued a notice to the housing enterprises to "stop the sale of special-rate housing" and asked them to stop the sale of "special-rate housing" below the declared price. Anhui Hefei, Wuhu, Dangshan and other places of individual property prices have also been required by local authorities not to reduce prices or give penalties. "The core reason behind these phenomena is that the price reduction of real estate brings local land finance problems." Zhang Dawei said.

Yan Yuejin, research director of the think tank center of Yi Ju Research Institute, believes that the order issued by the Housing Society of Enshi City in Hubei Province reflects the guidance of stabilizing house prices, stabilizing expectations and stabilizing the market. Looking at the original policy alone, it seems to be an intervention in price reduction. However, judging from the 10 price reduction actions summarized in the document (large price difference for filing opening, large price difference for existing auction houses, large price difference last year, large price difference for publicity expectations, large price difference for actual sales of costs, low-price sales without license, misleading price reduction for special housing, improper sales, price reduction and fall in price, etc.), some of these price reduction actions violate the rules for housing sales and stabilizing the market, and obviously need to be controlled by the government.

In Yan yuejin's view, Enshi city's document further embodies the concept of "stabilizing house prices", that is, house prices are not allowed to rise or fall too fast, and house prices should fluctuate within a reasonable range based on market planning and regulatory objectives.

Prior to this, the Ministry of Housing and Construction gave early warning to 10 cities where house prices had risen too fast. Some cities have already increased their regulatory policies. Suzhou has been included in the "70+1" house price monitoring scope of the National Bureau of Statistics due to large fluctuations in house prices and land prices, and the annual increase shall not exceed 5%. Suzhou also said that during the two-month transition period, several major indicators of the real estate market could not be controlled, and the regulation would be increased immediately after July, including expanding the scope of sales restriction and raising the social security threshold for foreigners to purchase houses. In addition, Suzhou real estate long-term control mechanism has been reported to the Ministry of Housing and Construction.

"The overall property market policy is based on stability. Stability is actually a two-way adjustment. A sharp rise is definitely not stable, but a sharp fall is also not stable." Zhang Dawei said.

More Debt for Infrastructure in China

Keep cutting those yuan targets.

Caixin: China Relaxes Funding Restriction on Key Projects
Local governments will be allowed to use proceeds from special-purpose bond issuance as project capital for certain infrastructure investments, according to a document issued Monday by the central government. The document also encourages local authorities and financial institutions to expand funding sources for major projects through market-based financing methods as long as they follow the rules.

China previously prohibited local governments from using any borrowed money as project capital put up by investors for initial investment in infrastructure to curb local debt surges.


Enshi, Hubei Says Will "Correct" Developer Price Cuts

While some in-demand cities are heating up, others are worried about 30 percent price cuts.

iFeng: 湖北恩施房协发文“纠正”房价猛降 三四线楼市开始扛不住了?
Sogou: Hubei Enshi Housing Society issued a document to "correct" the sharp drop in housing prices. The 3rd and 4th line housing market began to fail?
After two years of skyrocketing, the "wolf" of the price reduction in the third and fourth-tier property market has finally come.

A few days ago, there was a circular on the Internet issued by Enshi Real Estate Association of Enshi City, Enshi Prefecture, Hubei Province, on the early warning of stabilizing Enshi real estate market prices. The red tape sent to Enshi real estate enterprises, copied to Enshi Municipal People's Government, Housing and Construction Bureau, Natural Resources and Planning Bureau, points out that some real estate projects have taken drastic price reduction measures to promote sales, including 10 kinds of price reduction actions such as the opening price is lower than the record price of 800 yuan -1200 yuan/square meter, and the remaining 4,000 yuan-4,500 yuan/square meter sales, which have brought adverse effects on Enshi real estate market. Enshi City Housing Society requires companies that are opening for sale to correct their bad practices and will assist the competent authorities to systematically restrict the lower limit of the filing price.

Yan yuejin, director of research at the think tank center of yi ju research institute, told the Huaxia times that Enshi's document further embodies the concept of "stabilizing house prices", i.e. neither too fast rising nor too fast falling house prices are allowed. The cooling trend of the third and fourth-tier cities' real estate market is a market behavior, and is itself a reasonable way to squeeze the bubble in real estate prices. However, judging from the actual situation, some price reductions have obviously interfered with the market, and have also led to blind price reductions for various buildings, thus interfering with the market. This is obviously something the government needs to control.

Ten counts, 30% reduction

According to this document, there are currently ten main manifestations of the real estate price reduction in Enshi City, four of which have clarified the survey data: some real estate prices are high for the record price, while others are low for the opening price. The price reduction range is reduced by 800 yuan -1200 yuan/m2 on the basis of the record price; Some buildings are pre-sold and sold in stages, with the price drop in 300 yuan -500 yuan/m2 before and after the sale. Some buildings did not follow the market price rules for no reason, and the overall price of buildings dropped significantly from the same period last year-200 yuan -500 yuan/m2. Some of the remaining orders were sold at sales prices ranging from 4,000 yuan to 4,500 yuan per square meter.

The other six include attracting customers at low prices, causing great market fluctuations; Comprehensive costs and actual sales prices form a huge contrast, leaving room for unsustainable development of real estate. Low-cost storage of customers, even without pre-sale permits, that is, in disguised form to collect deposits and cards; Cooperate with the third party to reduce prices by means of distribution and electricity sales. Disrupt the market by reducing prices in disguised forms such as construction fund deduction houses and internal welfare houses. Sales staff to other sales department soliciting, bad influence; In violation of relevant regulations, the floor design height was lowered to about 2.7 meters, laying hidden troubles for homebuyers to settle down.

Third Bank Under Scrutiny: Jinan Rural Employee Publicly Accuses Bank Officers of Fraud

First it was Baoshang Bank being taken over. Then the PBoC stepped in to support Bank of Jinzhou in the interbank market. Now a third bank, Jinan Rural Commercial Bank, is drawing attention after rumors spread through WeChat. The key fact about this story is the bank employee used their real name, this is not an anonymous accusation. Moreover, the employee claims bank officers have been funding the mistresses and promiscuous lifestyle with bank funds.

iFeng: 济南农商行员工实名举报厅级干部:我啥都不怕了
Sogou: Jinan Agricultural Commercial Bank Staff Report Departmental Cadres with Real Names: I'm not afraid of anything
In addition, Bloomberg also reported that in 2013, a colleague from the former work unit gave birth to a child and invited me to accompany him to the hospital. I didn't accompany him because I was busy at work, and my nightmare started from then on. Later, I learned from the colleague that her child was Wang Zhongtan, the current director of Qingdao Banking Regulatory Bureau and then deputy director of the provincial banking regulatory bureau. The colleague got a quick promotion. Ding Haosheng, then deputy director of the Shandong Provincial Association in charge of personnel, also had this kind of male-female relationship in the system.
This story is already going viral.

iFeng: 济南农商行员工举报事件谜团:干部作风、员工管理、经济案
Sogou: The Mystery of Staff Report in Jinan Agricultural Commercial Bank: Cadre Style, Staff Management, Economic Case
A real-name reporting article from internal employees pushed Jinan Agricultural Commercial Bank to the forefront.

On June 8, Peng Bo, former deputy supervisor of Jinan Agricultural Commercial Bank, released an online article entitled "Real-name Report of Shandong Provincial Cadres' Misdemeanour and Loss of Bank Assets of Nearly 3 Billion Yuan" through his personal WeChat public number, pointing to many chaos in Jinan Agricultural Commercial Bank. On June 9, Jinan Agricultural and Commercial Bank's official WeChat released a message in response, saying, "Since May 24, Peng Bo has successively released information through individual websites and personal WeChat public numbers to fabricate facts and defame and maliciously slander relevant personnel."

Then, the two sides entered the second round from a distance. At noon on June 9, Peng Bo wrote again that "Jinan Agricultural Commercial Bank did not respond positively to all the problems I reported, including concealing 3 billion major cases, including the rapid promotion of leading mistresses ..." In an interview with the media on June 10, Ma Lijun, chairman of Jinan Agricultural Commercial Bank, commented on Peng Bo, saying, "By complaining, insulting and threatening, she tasted the benefits through this means. She wrote a" guarantee letter "in 2015."

On the evening of June 10, Peng Bo told surging news (www.thepaper.cn), "Ding Moumou (then deputy director of Shandong Rural Credit Union) took Ma Lijun and others with him, threatening to let me go to work, and asked me to write a guarantee that they would not talk about their problems in the future. If you don't write, you won't arrange your work. I didn't want to disturb them because I was exhausted physically and mentally. In order to get to work smoothly, I wrote a guarantee ". Later, surging news verified Peng Bo's statement to Ma Lijun, but as of press release, no response has been received.

At the same time of mutual resentment, whether the report on cadres' work style is true, whether Peng Bo's post adjustment is in compliance, and the progress of cases reported to the CBRC for more than two years ... too many mysteries remain unanswered, yet to be revealed by the official authorities.
iFeng has a special report section on this story, there are currently 12 stories.

In related news, a bank in Guizhou planning an IPO in Hong Kong discussed interbank risk in light of Baoshang Bank in its regulatory filings: 贵州银行提交港股IPO申请 提示包商银行同业存款风险
In addition to the general information disclosure, since the time of issuing the prospectus coincided with the serious credit risk of Baoshang Bank being taken over, Guizhou Bank disclosed the risks of the relevant business of Baoshang Bank in the prospectus.

The prospectus specifically reminds that as of March 31, 2019, the interbank deposits of Guizhou Bank in China Merchants Bank were 1.45 billion yuan, due to the significant increase in the expected credit risk of this interbank deposit. Therefore, the Bank of Guizhou decided to confirm the impairment loss of RMB 174 million on the amount of the profit and loss and other comprehensive income in the three months ended March 31.

This adjustment led to a significant increase in the provision for impairment losses of the Bank of China and other financial institutions in the first quarter of this year from RMB 600,000 in the same period in 2018 to RMB 174.6 million. Guizhou Bank also made a risk warning saying, “We cannot guarantee that other Chinese commercial banks that deposit interbank deposits will not have significant risks such as credit deterioration.”
Prior coverage

PBoC Steps in to Support Bank of Jinzhou
Baoshang Bank a Symptom of Widespread Corporate Looting
PBoC Blames Tomorrow Group for Isolated Risk of a Bank Crisis
China Banking: More Troubled Banks in Focus, PBoC Sets Up Deposit Insurance Company <--- this post has links to background on Bank of Jinzhou, it is not a surprise that this bank is in trouble


PBoC Steps in to Support Bank of Jinzhou

The key part of the story:
It is worth noting that this is the first interbank deposit receipt supported by the central bank. According to Jinzhou Bank's announcement, the inter-bank certificate of deposit is provided with credit enhancement by the private enterprise bond financing support tool (hereinafter referred to as CRMW)-if Jinzhou Bank fails to pay the full amount when the CD expires, the China Debt Credit Enhancement Investment Company will supplement the payment funds the next day.

  CRMW tool is one of the "three arrows" prepared by the central bank since late October 2018 to rescue private enterprises. This tool is mainly aimed at the situation that private enterprises in the bond market have difficulty in issuing bonds, which leads to the breaking of the capital chain. Specifically, the central bank provides part of the initial funds through refinancing, and the China Debt Credit Promotion Investment Company supports private enterprises that encounter temporary difficulties in debt financing by selling credit risk mitigation tools, guarantee credit enhancement and other means (see Caixin Weekly, No.42, 2018, "Central Bank Credit Enhancement for Private Enterprises").

财新: 锦州银行拟新发同业存单 首获央行增信支持 (Jinzhou bank's proposed new inter-bank certificates of deposit received increased support from the central bank)
Due to the recent takeover of the contractor bank, the risks of some other small and medium-sized banks have aroused market concern and the issuance of certificates of deposit among peers has slowed down. In response, regulators have frequently voiced their opinions and taken measures to smooth market sentiment.

On June 10, Jinzhou Bank (00416.HK) announced the 141st issue of interbank certificates of deposit in 2019. On June 12, the bank plans to issue 2 billion yuan of inter-bank certificates of deposit (hereinafter referred to as CD) with a maturity of six months, with a rating of AAA, an issue price of about 98.42 yuan and a reference yield of 3.21%. A senior market insider told Caixin that this rate of return is the average market level.

It is worth noting that this is the first interbank deposit receipt supported by the central bank. According to Jinzhou Bank's announcement, the inter-bank certificate of deposit is provided with credit enhancement by the private enterprise bond financing support tool (hereinafter referred to as CRMW)-if Jinzhou Bank fails to pay the full amount when the CD expires, the China Debt Credit Enhancement Investment Company will supplement the payment funds the next day.

  CRMW tool is one of the "three arrows" prepared by the central bank since late October 2018 to rescue private enterprises. This tool is mainly aimed at the situation that private enterprises in the bond market have difficulty in issuing bonds, which leads to the breaking of the capital chain. Specifically, the central bank provides part of the initial funds through refinancing, and the China Debt Credit Promotion Investment Company supports private enterprises that encounter temporary difficulties in debt financing by selling credit risk mitigation tools, guarantee credit enhancement and other means (see Caixin Weekly, No.42, 2018, "Central Bank Credit Enhancement for Private Enterprises").

The "June 30" liquidity test is approaching. Under the impact of the contractor bank incident, the market is concerned about whether small and medium-sized banks will suffer pains. On June 9, the official website of the central bank disclosed that the office of the financial stability development Committee had recently held a meeting to study the work of maintaining the stability of interbank business. At the meeting, the participating banks said that the scale of interbank business for other small and medium-sized banks would remain stable in the next step and the market order would be consciously maintained. At the same time, the People's Bank of China said it would use a variety of monetary policy tools to maintain a reasonable and sufficient liquidity in the financial market and provide targeted liquidity support to small and medium-sized banks.

Statistics from CICC's solid collection team show that on June 10, the actual issuance scale of interbank certificates of deposit accounted for 65% of the planned issuance scale, slightly warmer than the low point of the previous two weeks, but still lower than the 85% level before the contractor bank was taken over.

In recent days, Jinzhou Bank has been hit hard by the takeover of Baoshang Bank, resulting in difficult delivery of the annual report. At that time, financial institutions also sold Jinzhou Bank's bills.

Caixin reporter's inquiry data show that Jinzhou Bank has not issued any new CD since May 28 and has issued a CD stock of 48.61 billion yuan since 2019. According to the bank's 2019 issuance plan, the amount of CD to be issued for the whole year is 90 billion yuan, which is the highest in the interbank market.

Caixin reporters combined Jinzhou Bank's aforementioned issuance plan and previous financial reports to sort out, by the end of 2017, Jinzhou Bank had total assets of 723.4 billion yuan and total liabilities of 663.253 billion yuan. The expansion of the bank's balance sheet is driven by interbank investment and financing. On the asset side, the loan accounts for less than 30% of the total assets. The receivable investment under investment has exceeded 400 billion yuan, and the non-performing rate of this item has exceeded the non-performing rate of loans since 2016. On the debt side, the issuance of certificates of deposit by Jinzhou Bank has expanded significantly since 2016, with the amount of bonds payable reaching 30 billion yuan at the end of 2016, double the 15 billion yuan at the end of 2015. By the end of 2017, the amount of bonds payable by the bank was nearly 90 billion yuan, up 3 times from the end of 2016.

According to the aforementioned CD issuance plan of Jinzhou Bank, as of the end of 2017, the bank's non-performing rate was 1.04%, and its provision rate was 268.64%. This figure is obviously better than the average non-performing rate of 2% and the provision coverage rate of 150% in the banking industry, but the resignation of auditor Ernst & Young may indicate that there is moisture in this figure. Ernst & Young said it found that the bank's loan purpose was inconsistent with the contract.

On May 31, 2019, Jinzhou Bank announced that the board of directors and the audit committee received the resignation letter from Ernst & Young and immediately resigned as auditor of Jinzhou Bank. Prior to this, Jinzhou Bank had twice postponed the release of its 2018 annual report on April 1 and May 14. Trading of the company's shares was suspended from April 1. Later, Jinzhou Bank found a pre-listing agency to audit the annual report, which is expected to be published in August.

On the afternoon of June 9, the last day of the Dragon Boat Festival holiday, the CIRC issued its voice without naming and pointing out that "some have changed their auditors, with a large amount of tasks, and failed to complete the audit work on time." A few small and medium-sized banks fail to disclose their annual reports on time, which is a special case. These situations have been reported to the regulatory authorities according to regulations, and the regulatory authorities will urge relevant agencies to speed up the audit work and disclose the annual report as soon as possible. "

The legal representative and chairman of Jinzhou bank is now 62-year-old Zhang Wei, who has been the bank's chairman since 2008 and has not changed for 11 years. Jinzhou Bank's shareholding ratio is relatively scattered, and many major shareholders such as Dongxu Group, Tianyuan Manganese Industry, Baota Petrochemical and Huatai Motor are in poor financial condition and have many problems. Moreover, many shareholders pledged Jinzhou Bank's shares to the bank's affiliated companies or subordinate village banks. The true capital contribution is doubtful. So far, Jinzhou Finance Bureau holds less than 5%, only 4.27%. On June 2, people close to the supervision said Jinzhou local government would consider increasing capital and stabilizing the overall situation of the bank. However, so far Caixin reporter has not contacted Jinzhou Finance Bureau for verification.

Take Heed: Farage's New Warning for America

Back in 2014, I predicted a rise in political volatility and an opening for ambitious outsider politicians such as Donald Trump: Immigration Issue Set to Explode in America; Prepare for Political Volatility. The broader trend prediction was based on social mood. Political parties and mainstream media were becoming increasingly (and still are) out of step with the general public. The topic of immigration was a perfect example, as was foreign interventionism. The establishment pushe odpen borders policies that would have been extreme for the year 2000, when social mood peaked. Meanwhile, the public was already favoring immigration restrictions back then and they've only grown more restrictionist since then. Both major parties favored foreign intervention in countries such as Syria and Libya, while the public wanted out of Iraq and Afghanistan.

Going back to 2014, many people missed what happened in the UK because the media intentionally distorted reality in favor of their narrative, as they always do. UKIP was painted as an anti-immigration party built on racism and xenophobia, but the truth was:
UKIP's reason for existence was to get the United Kingdom out of the EU. There are many issues that fall under the control of Brussels, such as economic regulations, but the big issue that voters wanted to hear about was immigration. UKIP realized immigration was the big issue and it focused on that issue, turning it into a shock electoral victory.
Farage's party was engaged in political entrepreneurism. They were naive rookies who thought like a business, that politicians should deliver what voters are asking for. The political and media establishment are old hats at suppressing the will of the people and substituting established (corporate if that floats your boat) policies in their place.

I concluded the piece:
UKIP was a distant warning shot. The defeat of Eric Cantor was a much closer shot. Few if any politicians have stepped up to advocate an immigration restriction policy. They have nearly all taken the easy road of bashing President Obama for inaction. This leaves an opening for an ambitious politician.
That link takes you to a video of Trump criticizing Obama's immigration policy.

By now everyone knows the Brexit mess made by, again, establishment politicians who refuse to follow the will of the people. And as before, the result is a political revolution, the possible extinction of the Tory party.

MishTalk: Tory Choice: Political Extinction or Halloween Brexit
“Peterborough has shown clear support for Labour’s programme to end austerity and invest in services and communities, rejecting a decade of Tory cuts and their disastrous handling of Brexit. In this key seat, the Conservatives have been pushed to the margins."

What a hoot.

Labour's percentage fell 16 percentage points from the last election.

Brexit has split both Labour and the Tories.

The Brexit Party

A remarkable result for our 8 week old party. If we can come so close in our 201st target seat, no seat is safe. We're very proud of @MikeGreeneTBP & our supporters who worked so hard. Thanks to the people of Peterborough who voted for us - we promise you that we're here to stay!

9:51 PM - Jun 6, 2019

"A remarkable result for our 8 week old party. If we can come so close in our 201st target seat, no seat is safe."

That's the correct message.
What is the message for the United States? Brexit is to the UK as President Trump's platform is to the United States. If President Trump and the GOP cannot deliver on ending illegal immigration, reducing legal immigration, rebalancing trade and abandoning interventionist foreign policy, the voters will find someone who can. Meanwhile, the Democrats and media who think they are achieving some great victory by thwarting Trump for going on three years now with nonsense such as Russiagate, will find they have opened the door to a heretofore unimagined nationalist populism led by a right-wing party that doesn't even exist. Tucker Carlson (the most prominent advocate for these policies at the moment) as President, leading a brand new party that wins control of the House in its first major election. That of the Democrats somehow get shocked in their primary by a nationalist socialist and follow the lead of Denmark's center-left. Either way, huge changes are coming. Maybe not in 2020, but very likely in 2022 or 2024.


A-Shares: Flash Crashes Are Back

iFeng: 闪崩股再现江湖,四大诱因帮你避雷
Recently, there have been a number of flash crashes. On Thursday (June 6), a number of stocks such as Debe Electric, Nanxing Equipment, Hansen Pharmaceuticals, and Fujian Dickinson hit a daily limit. Insiders said that the "flash crash" stocks were caught off guard and investors had better prevent it in advance. They should first strengthen the research on the fundamentals of the company's business, financial data and shareholders' shareholding, and treat the companies with reduced shareholders and changed performance cautiously.

Several stocks collapsed in the session.

In the afternoon of June 6, Hecheng shares collapsed and fell to a limit. The previous trading day, June 5, saw the shares collapse and fall to a limit.

In addition to the above-mentioned companies, on Thursday, Founder Motor, Contact Interaction, Tongyi Stock, Tiansheng New Material, Derivative Technology, Lingyun Stock, Longyu Fuel Oil, Jinaobo, Wutong Holding, Zhisongde, Hongbo Stock, Nongshang Environment, Jinzhi Technology, Gosbell, Antang Holding, Huamai Technology, Tianwei Video, Huaxing Venture and other shares all showed a trend of intraday "flash collapse" and decline.

Penny Stocks Appear Again

Regulators accelerated the withdrawal of listed companies with problems and scared ST shares. Investors voted with their feet one after another. Since mid-to-late May, the number of daily limit falls for theme stocks and ST stocks has remained above 30.

On June 6, the ST concept index fell 2.25% again. Of the 138 ST stocks, 106 fell and more than 30 stocks fell to their limit. Only 19 ST shares have gone red. *ST China's stock price fell below 1 yuan to close at 0.99 yuan.

December 27, 2018 is a day recorded in the history of A shares: the first "delisting of par value". As the closing price for 20 consecutive trading days was lower than the par value of the shares, zhonghong shares were eventually delisted by Shenzhen stock exchange.

On the last trading day of A shares, Zhonghong closed up 4.76% and its share price was fixed at 0.22 yuan per share, setting a record low for A shares. Investors involved suffered heavy losses.

With Zhonghong's shares withdrawing from the market at face value, the future may sound the alarm bell for listed companies with one yuan of shares. This means that the prelude to the delisting of par value has begun, and the delisting of one-dollar and two-dollar listed companies in the A-share market is expected to increase significantly in the future.

Some investors said that if the market expectation does not improve, *ST Hua Ye may be the second "delisting" stock.

Wind data shows that as of June 6, more than 50 listed companies in the A-share market had stock prices less than 2 yuan. *ST baby eagle, *ST big control, *ST Hua Xin and other shares are hovering around one yuan.

Four Factors Contribute to Causes

Judging from the flash crash of individual stocks on the 6th, they mainly have the following characteristics:

1. Before the flash crash, the stock price rose greatly, and the profit-making market concentrated on fleeing.

In the flash crash, most of the stocks were those that had increased greatly before and had not undergone any adjustment. Such as tiansheng new material. As of yesterday, the stock has risen continuously since May, with a cumulative increase of more than 50%. In addition, shares such as Huamai Technology and Tianwei Video have risen more than 20% against the trend since May.

2. For small-cap stocks with poor fundamentals, a small number of orders will cause a flash crash

Contact Interactive Stock Price to Flash, Collapse and Limit in Early Trading. The company's performance changed in 2018, with a loss of 669 million yuan, after the company's performance express said that the company would realize a net profit of 18.05 million yuan. In the first quarter, the company's net profit continued to decline, with a net profit of 31.01 million yuan in the first quarter, a year-on-year decline of 70%, and a net cash flow of-180 million yuan.

Fujian's Dickinson released its first-quarter results report on the evening of April 24, saying that during the reporting period, the net loss was 12.255 million yuan, while the profit for the same period last year was 1.649 million yuan. Operating income was 9.869 million yuan, down 61.65% from the same period last year. The basic loss per share was 0.05 yuan, while the profit for the same period last year was 0.01 yuan.

3. Shareholders reduce their shares collectively

In addition, the reduction of major shareholders is also the main trigger for the flash crash.

On the evening of May 30, Founder Electric announced that Qingdao Jinshihao Investment Co., Ltd., a 6.33% shareholder, plans to reduce its holdings by no more than 28.41 million shares, or no more than 6% of its total share capital, in the next six months. Fundamentally speaking, Founder Motors, which specializes in new energy automobile motors and controllers and micromotors, lost 444 million yuan in 2018.

Nanxing Equipment announced in the evening of June 4 that due to its own fund demand, Yang Jianlin, director, secretary of the board of directors and chief financial officer holding about 410,000 shares (accounting for 0.31% of the company's total share capital), plans to reduce the company's shares by centralized bidding within 6 months after the 15 trading days from the date of the announcement (accounting for 0.08% of the company's total share capital). Mr. He Jianwei, deputy general manager holding about 80,000 shares of the company (accounting for 0.06% of the total share capital of the company), plans to reduce the company's shares by centralized bidding within 6 months after 15 trading days from the date of disclosure of this announcement to no more than about 20,000 shares (accounting for 0.02% of the total share capital of the company).

Hansen Pharmaceuticals announced that on May 24, 2019, the company received "Notice on Reduction of Shares in Hunan Hansen Pharmaceuticals Co., Ltd." and "Brief Equity Change Report of Hunan Hansen Pharmaceuticals Co., Ltd." issued by Shanghai Fosun Pharmaceutical Industry Development Co., Ltd. ("Shanghai Fosun"). From December 26, 2018 to May 23, 2019, Shanghai Fosun reduced its shares by means of centralized competitive bidding, totaling about 952,900 shares, accounting for 0.32192% of the company's total share capital. After this reduction, Shanghai Fosun's shareholding ratio fell to 4.99997%.

4. Trust Plans Assemble

Looking through the detailed information of "flash crash" stocks, one factor that has nothing to do with performance and market is also worthy of attention, that is, many companies have multiple trust and asset management plans in the list of shareholders, and the proportion of individual shares is still quite concentrated. Such as Jin zhi technology, contact interaction, derivative technology, etc.

Flash Collapse is a Risk Education Course

Since 2017, individual stocks have continuously collapsed due to trust shareholding, high pledge and lack of liquidity. Quoting the Securities Times: "Is it not a risk education", it tells investors to always keep their heart in awe of the market.

The Securities Times published a commentary article entitled "Bad Stocks Collapse and Falling out of Market Integrity": A-share stocks continue to collapse. At the current stage of stricter supervision and gradual conversion of investment style to value investment, some stocks that deviate excessively from internal value have collapsed, which is essentially a return of value. The only choice for investors to avoid the flash crash is to conform to the market situation and uphold the value investment concept.

The Securities and Futures Commission has repeatedly said that the price of shell resources has dropped considerably compared with the previous period. The speculation of shell resources such as "small speculation" and "rotten speculation" in the market has been curbed to a certain extent and the market response has been positive. In the next step, the CSRC will continue to improve the delisting system from the perspective of protecting the interests of small and medium-sized investors based on the principle of "according to law, comprehensively and strictly" supervision and in combination with the revision of the Securities Law.

On May 11, Yi Huiman, Chairman of the China Securities Regulatory Commission, said at the 2019 annual meeting of the China Association of Listed Companies and the 7th meeting of the 2nd Board of Directors that it was necessary to explore innovative delisting methods and realize various delisting channels. For enterprises that seriously disrupt the market order and meet the delisting criteria, they should resolutely withdraw from the market and withdraw to the end. For the listed companies with frequent chaos, the focus should be on strict supervision, so as to strengthen the power of supervision and make the wrongdoers pay the price.

On May 13, on the first trading day after Chairman Yi's speech, there was one plate in the market with the most differentiated trend, namely ST plate. The front-page commentary of Securities Daily said: Chairman Yi's speech, A shares said "understood" with 42 limit ST shares.

On June 5, the website of the CSRC showed that the CSRC would continue to step up enforcement of information disclosure violations of listed companies, urging listed companies and major shareholders to tell the truth, make true accounts, speak in a timely manner, not disclose false information, not engage in insider trading, and not manipulate stock prices. Firmly hold the "four bottom lines" to ensure the construction of a standardized, transparent, open, dynamic and resilient capital market.


Baoshang Bank a Symptom of Widespread Corporate Looting

Update: English version here

Many observers see the Baoshang Bank takeover as a banking story, but in good news for the banking sector and bad news for China's financial markets, it might be a sign of corporate looting instead. The Baoshang Bank incident came only a month after the Market Rattled by Kangmei's $4.4 Billion Accounting Error for example. At heart, China lacks property rights. Major shareholders can extract wealth and leave a hollowed-out shell of company in the hands of equity and debt holders. A major area of disagreement between China bulls and bears rests on this issue. Is the Baoshang Bank incident isolated or does it signal this problem is finally too big to handle?

Translation note: in a couple of places I changed the Google translation to "looting" and "hollowing out" as I think those are more accurate than the machine translation. Looting is a more accurate term for what is taking place, but the editorial itself did not use such a loaded word.

Caixin: Editorial | Baoshang Bank’s warning
Baoshang Bank was taken over and the action has just begun, but its impact on the market has gradually subsided. The bank has a large amount of funds to be controlled by the major shareholders tomorrow. occupied illegal , and it was difficult to return for a long time, which led to a serious credit crisis, which triggered the legal conditions to be taken over according to law for the first time in 20 years. This move is undoubtedly an important step in the "anti-risk" battle. This incident may have lost the sensation of news, but the reflection it brings should be long-lasting and profound. We should study how to prevent major shareholders from “looting” and explore how the regulatory authorities should deal with risk institutions in a timely manner to avoid problems.

At the beginning of the acceptance of Baoshang Bank, some market participants expressed doubts about whether this would impact the financial market when the downward pressure on the Chinese economy increased. There were also views on the trade friction between China and the United States, and questioned the timing of takeover. improper. Now it seems that these ideas are too much to worry about. The interest rate price signal in the interbank market indicates that the market has basically returned to calm. This is due to the thorough deployment and decisive efforts of the regulators. Several consecutive "answer reporters", explaining the reasons for taking over, the follow-up treatment plan and the liquidity of small and medium-sized banks, provided sufficient expectations to the market, eased market anxiety, and at the same time, the takeover action was proceeding in an orderly manner. However, this incident reflects the common problems of financial institutions represented by small and medium-sized banks and must be given sufficient attention. The takeover may be able to cope with the moment and solve the problem. However, the supervision should be institutional and normal, in order to cope with the endless financial risks. The Baoshang Bank incident is a lesson and a warning.

The crisis of the Baoshang Bank stems from the hollowing-out by major shareholders. This is not a new phenomenon. Similar incidents have long been commonplace and are not limited to the financial sector. However, due to the uncertainty, high leverage and contagiousness of financial risks, such hollowing-out behaviors are more harmful, spread more widely and more destructive. "Tomorrow Department" and "Ampang Department" have been wiped out one after another. Their methods have long been known. They are nothing more than resorting to capital evasion, capital injection, false capital injection, and mass transfer through improper affiliate transactions, depending on the financial institution as a "cash machine". Since the majority shareholder has mastered the absolute right to speak, the internal control mechanism of financial institutions is ineffective, and financial risks are finally detonated, which has severely hit financial credit. In China, there is still a long way to go to improve corporate governance in financial institutions.
Although it isn't directly applicable in this case, my mind goes back to cartoon I saw in the late 1990s of a man in a restaurant, paying for a fake bottle of XO with counterfeit renminbi. Both are happy. As long as you take Chinese financial statements at face value, you can invest with confidence!
The "financial crocodile" smashed not only the internal control of this layer of window paper. The "Tomorrow Department" incident has been more than two years, but the large amount of capital exchanges between the Baoshang Bank has not been significantly affected. Data show that as of the end of September 2018, the total debt of Baoshang Bank was 503.4 billion yuan, of which 212.9 billion yuan was absorbed by various deposits, and the inter-bank liabilities (including interbank deposit certificates) were 221.1 billion yuan. In 2018, the rating of the interbank deposit receipts of the contractor bank has been negative. Is the counterparty collectively neglecting risk management or completely disregarding the potential risks? It is difficult to draw conclusions. However, the "comprehensive beliefs" firmly believed by all parties that "there will always be people who have the bottom" have undoubtedly played a role in fueling the situation. As long as the return is high, the risk can be put aside. A mature financial market can never be so strange. Breaking the industry's belief in the business, it has tried in the process of taking over the Baoshang Bank, but it may not be thorough enough for various practical reasons. The next step needs to consider the regulatory system and process, how to prevent the emergence of the Nth Baoshang Bank.
If you want to promote an air of calm, do not use the term "Nth."
The Baoshang Bank incident reflects the bad ecology of financial institutions such as small and medium-sized banks. They have weak storage capacity, low internal control levels, bad growth, a large number of peers, and high costs. On the other hand, in recent years, China's financial industry has shown unprecedented prosperity. The added value of the financial services industry has been rising in proportion to the GDP, even surpassing the developed countries such as the United States and Britain. However, behind this surface prosperity is the constant pressure on the real economy. Finance is the blood of the modern economy and relies on the real economy. The development of the financial industry is inseparable from the soil of the real economy. If a large amount of money is only vacated in the financial sector, or even become a "blood machine" of the real economy, the existence of relevant financial institutions will have a big question mark. The reform of the financial supply side is to solve this structural problem. To build a multi-level, wide-coverage financial system, we must be able to effectively serve the real economy and meet social needs. At the same time, we must try our best to break down the institutional and institutional obstacles that restrict financial services. In this regard, we must make greater determination and courage.
This paragraph is the essence of many China bear theses. The U.S. economy is over-financialized, debt and interest costs are choking the real economy. China has by some measures surpassed the United States in its financialization and in the velocity of its debt creation.
As mentioned earlier, there have been some doubts about the timing of taking over the contractor's bank. Regardless of the endorsement of interest, it is necessary to distinguish the deviation of knowledge. Strengthening financial supervision should not set too many preconditions, and find that violations of laws and regulations should be promptly issued, otherwise it is tantamount to connivance or even collusion. The position of supervision cannot be loosened, and there should be no extraneous factors, otherwise it will become an opportunist. Over the years, the shareholding ratio and the number of homes held by the “Tomorrow Department” have long violated relevant regulatory requirements, but they have not been corrected for a long time. It can be a unique exception, which has transmitted very harmful to the financial market. signal. It is very necessary for the central bank and the regulatory authorities to face this "historical issue" and take it out. It should become a new starting point for strengthening supervision and reshaping China's financial ecology.

The storm of the Baoshang Bank incident has largely subsided. The person in charge of the central bank said that there is no plan to take over other institutions. We are also looking forward to this. However, the warnings issued in this case are not lost in general terms and should not be ignored. Established in 1999, Tomorrow Holdings constitutes the "wonderful situation of the 20 years in China's financial industry." Only by thoroughly disposing of the "Tomorrow Department" and its kind, and preventing the "Tomorrow System" from the system and supervision, the Chinese financial market is only Have a beautiful tomorrow.
Calm was restored to parts of the financial market after Bear Stearns went bankrupt. It didn't last. The biggest question around the Baoshang Bank takeover was why now, why this bank? Financial problems are normally swept under the rug. Was it a warning short to others, is it really a unique case as the regulators argue, or is it a sign that accumulated losses and fraud are becoming to large to handle?


July Fed Rate Cuts Odds at 88pc

Trade Wars Escalated Quickly

The Civil War meme continues gaining steam as trade wars go intranational.

AP: Spike Lee calls for Hollywood to ‘shut it down’ in Georgia
Director Spike Lee is calling for Hollywood production companies to leave Georgia over a law that would ban abortions as early as six weeks, upon detection of a fetal heartbeat.

China M2 Growth on Par With Turkey

Since the end of 2008, U.S. M2 increased 77 percent. Chinese M2 increased 300 percent. Only Turkey and Russia are in the ballpark and both of those currencies experienced major declines over the past several years.

PBoC: No Red Line, Yuan Will Adjust According to Market

Two former PBoC officials have been erasing the red line at USDCNY 7.00 for a little more than a week and now the current PBoC chief confirms there is no line.

Reuters: Some yuan flexibility good, China central bank boss tells Bloomberg
Asked if there was a red line for the yuan, which has shed more than 3 percent against the dollar since mid-April and was flirting with the 7-per-dollar level, Yi said no “numerical number” was more important than another.

“The trade war would have a temporary depreciation pressure on renminbi, but you see, after the noise, renminbi will continue to be very stable and relatively strong compared to emerging market currencies, even compared to convertible currencies,” Yi said, using the yuan’s official name.

“I’m very confident renminbi will continue to be stable at a more or less equilibrium level.”

On monetary policy, the People’s Bank of China governor said there was “tremendous” room to make adjustments if the China-U.S. trade war worsens.

“We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” Yi said.
When you do not have enough reserves to defend a line in the sand, you don't draw a line in the sand.


American Civil War Meme Spreading

The End of the United States of America

Here the Bears Come Again

Looks like a good time to short again. This is only a sampling of the many shortable charts out there. The picture could change swiftly if the market zooms higher, but I like the odds here.


Immigration Restricting Nationalist Socialists Take Denmark

The Guardian: Centre-left Social Democrats set to win in Denmark elections
The centre-left party was forecast to beat the centre-right Liberals of the outgoing prime minister, Lars Løkke Rasmussen, set to finish second on nearly 21%, while the populist far-right Danish People’s party (DPP) managed 9.8% – less than half its score in the 2015 election.

The polls for broadcasters DR and TV2 gave the Social Democrat-led “red bloc” of leftist parties more than 90 seats in the 179-seat Folketing.The party leader, Mette Frederiksen, however, has repeatedly said that rather than assemble a coalition, she aims to form a minority government – common in Denmark – with ad hoc support from parties across the spectrum.

...Voting in the Copenhagen suburb of Varlose, Frederiksen said her party’s tougher, at times controversial stance on immigration had helped it win back support. “Some Social Democrat voters who have been lost in the last few years, who didn’t support our migration policy, are returning this time,” she said.

The centre-left party focused its campaign on climate issues and the defence of Denmark’s prized welfare state, promising to reverse years of spending cuts to education and healthcare, and maintain its hardline approach to immigration.
As has been the case since at least 2014 (See: Immigration Issue Set to Explode in America; Prepare for Political Volatility), immigration is a major winning issue. Most major parties abandon the issue. Small and upstart parties have ridden their virtual monopoly on the issue into major party status or even taken power. Denmark's center-left party laid the foundation for today's win back in June 2018: Danish Left Splits Nationalist, Ends 25 Year-Old Agreement. As this election approached, the party took a harder line on migration. Mass Deportations Coming Soon: Danish Center-Left Ready to Expel Migrants
But it is the government policies her party has supported or failed to oppose which have been most alarming for her allies in the left-of-centre red bloc. The Social Democrats voted in favour of a law allowing jewellery to be stripped from refugees, and a burqa and niqab ban, and abstained rather than voted against a law on mandatory handshakes irrespective of religious sentiment at citizenship ceremonies, and a plan to house criminal asylum seekers on an island used for researching contagious animal diseases. In February, she backed what the DPP has branded a “paradigm shift” – a push to make repatriation, rather than integration, the goal of asylum policy.
The only reason the The Guardian isn't calling Frederiksen a "far-right" "Nazi" is because she's left-wing on the economy and green. Ironically, so were the Nazis, but we can't expect journalists to have read history books. In any event, and in part because the left-wing dominated media can't help but cheer the victory, mass deportation of migrants from Europe is being mainstreamed. And after that will begin Muslim deportations:
Anja Westphal, an analyst at Denmark’s public broadcaster DR, said: “Mette Frederiksen has loved the Danish People’s party to death with her tough line on foreigners.”

But the far-right party has also come under pressure from two new extreme-right parties, one of which, Stram Kurs (Hard Line), has called for Islam to be banned and hundreds of thousands of Muslims to be deported. Exit polls suggested that Stram Kurs was just under the 2% threshold necessary to win a seat in parliament.

China's Dollar Nightmare: Fed Rate Cuts Could Spark Another Housing Bubble

Quantitative easing led to the Arab Spring, Chinese economic boom (though China stimulus was the main factor) and a commodities boom. Emerging markets peaked in 2011 as the effects wore off. China's housing market and the yuan were boosted by another rounds of quantitative easing and a Chinese stimulus effort in 2015/2016. With the Federal Reserve seemingly shifting to a dovish footing and Chinese home prices already lifting off on domestic stimulus expectations, there are already worries of a repeat.

21st Century: 社论丨美国股市或会深度调整 中国楼市仍需加强调控
Sogou: Editorial: U.S. Stock Market May Adjust Deeply China's Real Estate Market Still Needs to Strengthen Regulation
According to statistics from the Yi Ju Real Estate Research Institute, the house price in Baicheng was 13,867 yuan/square meter in the first four months of this year, up 14.5% year-on-year, an increase from January to March. From a city perspective, 19 out of 100 cities experienced a year-on-year increase of over 20% in housing prices from January to April, entering the "overheated housing price" range.

There is a special regulation cycle in China's real estate market, that is, the property market is forced to be regulated after overheating. However, as the downward pressure on the economy increases, the regulation will be released. As money is loosened and supply is suppressed during the regulation period, house prices will have a pulse-like rise cycle, which will gradually spread from first-tier cities to third-and fourth-tier cities, eventually forcing them to enter the "regulation cycle" again and again.

Comparatively speaking, the rise in house prices in the first four months of this year is not the result of the relaxation of the control cycle into the "pulse phase", because most of the control measures have not been cancelled, only some cities have slightly relaxed. Moreover, not far from 2017 when the regulation was started, the real estate market did not bear a long period of downward pressure.

The impulse to increase house prices in a short period of time is related to market expectations. From the second half of last year to the first quarter of this year, China has adopted a counter-cyclical adjustment policy. In terms of monetary policy, liquidity supply is relatively large, which is reflected in the amount of credit and the scale of social financing. Although monetary policy has returned to a stable and neutral state after the end of the first quarter, the expectation of rising house prices triggered by this period has expanded the sales volume of some "demand and concept" regional property markets, thus driving the house prices to continue to rise.

We should be highly alert to this unique phenomenon of house purchase. Some people have come up with the expectation of rising property prices because of their judgment on the trend of certain macro policies of the government, and have therefore made the decision to buy a house, leading to the self-realization of the expectation of rising property prices time and time again and falling into a bad cycle.

The trade war has brought new uncertainties to the global economy. Although exports do not contribute much to China's economic growth, they will also affect the economic operation. The market may expect China to take stimulus measures to expand investment, such as easing monetary policy and lifting the regulatory policy on the property market. This expectation has brought a strong supporting effect to the real estate market. Therefore, the regulation policy cannot be weakened during this period. On the contrary, the regulation management should be strengthened to prevent irrational expectations from interfering with market stability.

A new threat may be emerging. A few days ago, various economic indicators in the United States showed that economic growth had entered an inflection point, the effect of tax cuts was disappearing, the manufacturing index hit a 10-year low, combined with the damage caused by trade wars and greater uncertainty, the recession probability of the United States economy was increasing, and hedge funds were buying bonds. As the size of U.S. treasury bonds and corporate bonds have both set historical records, and the latter have also increased leverage significantly, the recession may result in a financial crisis.

This dangerous prospect may force the Federal Reserve to cut interest rates in a short period of time. Market expectations are more radical. Some investment institutions even expect the US federal funds rate to drop to zero in the next 18 months. However, as the economic recession continues to show, central banks in many economies have cut interest rates one after another. Therefore, the new round of quantitative easing by the Federal Reserve may come true. At that time, there may be a large amount of cheap liquidity flowing to emerging market countries again, such as China, resulting in a new round of upward pressure on the property market simply because of "rising expectations".

For a long time, the industry believed that there were two bubbles in the world, namely, the U.S. stock market and China's property market, both of which had overpriced. When Sino-US economic and trade are stable, these two bubbles can be gradually digested through time and may realize a soft landing. Now, because the trade war has brought about changes in manufacturing investment and trade demand, breaking the past balance, the U.S. stock market is likely to undergo a deep adjustment, and the direction of China's property market is also attracting much attention.

Since China has implemented effective capital control measures, it is difficult to sell properties and transfer assets, and the RMB will not depreciate significantly. If the U.S. stock bubble bursts, it is difficult to transmit it to China's property market. On the contrary, if external shocks and possible quantitative easing policies of the Federal Reserve need to be dealt with, China's domestic liquidity is more likely to support house prices than a hard landing. Therefore, at present and in the future, we should focus on preventing house prices from overheating.

In fact, most cities in China have no incentive to rise. For example, the property market in third-and fourth-tier cities has overdrawn excessively in the past few years, and future demand will be relatively weak, which may lead to an increase in inventories. Economic restructuring and corporate upgrading will affect employment and wage growth, and will not support the continued rise of already exorbitant housing prices. Judging from purchasing power and demand, the real estate market should enter a long-term adjustment period, which will be a gentle process. Therefore, if some "expectations" continue to surge, this gentle process will be complicated and may lead to ups and downs.

In response to the trade war, we must attach great importance to the impact of domestic and foreign economic situation and monetary environment on the real estate market. We must maintain the smooth operation of the real estate market, guard against the large-scale purchase of land by real estate enterprises through increased leverage, and push up the expectations of rising prices. We must also curb the attempts of some local governments to stimulate the real estate market to boost the local economy. In an uncertain environment, we should attach importance to maintaining the stability of the property market and avoid new stimulus and risks.