Stock Market and Yuan Set for Double Drop

Bloomberg: PBOC Using Stealth Intervention as Reserves Decline, Daiwa Says
The People’s Bank of China may have bought foreign currency from local banks, used the forwards market to prop up the yuan and asked the nation’s sovereign wealth fund to liquidate overseas assets, Daiwa analysts Kevin Lai and Junjie Tang wrote in a note on Tuesday. While Lai didn’t provide any direct evidence in the note, he said in an e-mailed response that his conclusions were based on a “logical deduction.”
Bloomberg" The China Intervention Trade Is Back as State Funds Battle Bears
“Near-term data like trade is negative, and so there is selling pressure,” said Francis Cheung, a senior strategist at CLSA Ltd. in Hong Kong. “The government is supporting the market for the NPC, so when it ends, we could see a pullback.”
If you are someone who missed the opportunity to exit yuan or A-share positions, the Chinese government is helpfully propping up the market so you can get your selling done while the NPC is going on.

As forthe yuan, the saying, "Don't fight the Fed" has an exception. When the central bank is fighting human nature and the fundamental laws of economics, you can bet on nature and win. Ultimately, the central bank will be shown to have as much control over the economy as King Canute had over the tides.

No comments:

Post a Comment