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Chinese Yuan Surges & Stocks Jump To 2014 Highs After PBOC Unleashes QE | Zero Hedge

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Chinese Yuan Surges & Stocks Jump To 2014

Highs After PBOC Unleashes QE
Submitted by Tyler Durden on 07/31/2014 22:27 -0400

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Quietly, and without the drama associated with The Fed and ECB,
China unveiled what looks like QE recently (as we discussed
in detail here). Whether this is a stealth creation of a 'fanniemae' structure to support housing or merely another channel for
the PBOC to shovel out hole-filling liquidity is unclear. However,
one thing is very clear, demand for CNY is surging (even as
the PBOC weakens its fixing) and the Shanghai Composite is
surging as hot money chases free money once again...

Audio Commentary From RanSquawk:

The Yuan has rallied (lower on the chart) for 8 days straight as
PBOC weakened its Fix.
RanSquawk News

The Fly On The Wall

08-01 1:33: Indian HSBC Manufacturing PMI (Jul) M/M

53.0 (Prev. 51.5)
08-01 1:33: AXA (C S FP) H1 net EUR 3.0bln vs. Exp. EUR
2.7bln
08-01 1:33: SocGen (GLE FP) Q2 net EUR 1.03bln vs.
Exp. EUR 852mln
08-01 1:33: Japanese Vehicle Sales (Jul) Y/Y 0.6%
(Prev. -0.7%)
08-01 1:33: Arcelormittal (MT NA) Q2 EBITDA EUR
1.76bln vs. Exp. EUR 1.84bln;...
08-01 1:33: Russia Manufacturing PMI (Jul) M/M 51.0 vs.
Exp. 48.9 (Prev. 49.1)
08-01 1:33: Mitsubishi C hemical (4188 JT) Q1 2014
operating profit JPY 29.50bln...
08-01 1:33: ASIA-PAC EQUITY MARKET WRAP: Asian
stocks trade mostly lower...

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The Chinese stock market has quietly surged to its highest since
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08-01 1:41: nothing like this discussion (forexskin)

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Chinese Yuan Surges & Stocks Jump To 2014 Highs After PBOC Unleashes QE | Zero Hedge
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1. China: better data on exports & PMI, GDP

upgrades (BofAML upgraded 2014 GDP growth
forecast to 7.4% from 7.2%), policy U-turn putting
floor on growth, hopes for a Chinese QE, success in
anti-corruption igniting hopes for reform. And China
is of course relatively inexpensive and out of favor:
in price-to-book terms, Chinese financials are trading
at their cheapest level in more than 9 years relative
to global financials

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2. US growth: NE Asia has historically been a play on

US growth; no coincidence that flows to NE Asian
markets are coinciding with stronger US GDP (up 4%
in Q2).

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outsiderclub.com/Ma

They Know What's

About To Happen &

3. The end of the carry-trade: this is the more

intriguing argument. Almost all investors we meet
believe that a rise in stock markets and a decline in
bond yields will not continue indefinitely. We believe
concern that rates must inevitably normalize in
coming months as growth picks-up, and concern
that a flip in Treasury yields causes stocks to decline
is causing investors to consider raising cash and
finding uncorrelated investments. Japan, China and
Korea rank in the top ten equity markets least
positively correlated with SPX and most positively
correlated with movements in 30y UST yield
(correlation analysis based on weekly log change
over the past 10 years). Carry-trades are at risk
from rising rates. We think markets with low yields
and higher exposure to US economic growth will be
better protected if the backdrop flips from Low
Rates-Low Growth to High Growth-Higher Rates.
Charts: Bloomberg
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Thu, 07/31/2014 -

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8/1/2014

Chinese Yuan Surges & Stocks Jump To 2014 Highs After PBOC Unleashes QE | Zero Hedge
None of that.

22:33 | 5030979

I can explain you what it is

Same as Federal Reserve QE, monetizing losing derivatives

positions.

In China's case, they are monetazing pyramid schemes

involved in China's shadow banking where Wealth Management
Products promise 25%-50% annual interest rates for loans.

So, the country has run out of suckers, money is already

converted to USD, Toronto or London real estate and has
moved out of China via HSBC.

Politburo is simply monetizing their own pyramid schemes by

creating CNY by buying these schemes.

They are letting thousands of them collapse, but they are

bailing out their own banks involved with pyramid schemes.

It is that simple.
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comments

Al Huxley

Thu,

07/31/2014 Whew! well,

as long as
23:10 |
they're doing
5031092
stuff that has no
negative side effects, we can all just be thankful that
they're modernizing their financial system and bringing it to
global standards...
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post comments

Greenskeeper_Carl

Thu,

if this is true, 07/31/2014 its the best

23:11 |
and simple
5031094
explanation i have
heard. The shadow banking pyramid schemes does sound
familiar though. As does monetizing losing derivatives
positions. These people are leveraged so far, a small move
in the wrong direction wipes out all their capital pretty
quick. If all of this wealth escaping is coming to an end,
should be interesting to see what happens to these real
estate markets with no more chinese buyers paying cash
for them without ever laying eyes on the property. Also,
no ammount of money printing is going to unwind the
rehypothicated commodity scandals going on. You either
have the commodity or you don't. people who actually
make things need the cooper, aluminum, etc, not freshly
printed money.
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Cognitive Dissonance

Thu, 07/31/2014 -

22:36 | 5030990
It was China's
turn in the global rotation. Draghi is warming up in the
bullpen.
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comments

ekm1

Thu,
By the same
logic.

Countries need not

real eonomy.

07/31/2014 22:39 |
5031001

They can simply mark up numbers on computers at

1:10000 leverage

Rotating QEs between countries simply kills the real

economic output, which is actually occurring
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Chinese Yuan Surges & Stocks Jump To 2014 Highs After PBOC Unleashes QE | Zero Hedge
post comments

HardlyZero
BRICs in time
to bail-out
Argentina...then
Portugal ?

Thu,
07/31/2014 23:50 |
5031203

Fiat follies...bread and circus.

Fresh fiat.
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post comments

Yen Cross

Thu, 07/31/2014 -

22:38 | 5030994
China needs to
coupon that $usd QE-loan guarantee thingy? One $
trillion of slush to clean up the rehypothecation of
real-estate and commodities debacle!
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comments

GrinandBearit

Thu, 07/31/2014 -

22:39 | 5031000
This
should elevate the US markets tonight/tomorrow.
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comments

Never One Roach

Thu, 07/31/2014 -

The "Smart Money" 22:43 | 5031013

moves out ASAP in RE overseas in suitcases, wires,
middle men, etc. First they send the kids over [to
Vancouver, SF, LA, Sugar Land...where ever] then comes the
Loot, then comes the Main Man and shuts the door behind
him.
China ain't the only one. The title closing lady down the block
says 10-20% of her closing are with very young Nigerian [and
other African] college students who are sent here by their
very wealthy [usually politician fathers back home] who
receive the millions in wire transfers "for school Thingamajigs"
while the kids then buy two three houses with the Loot.
No questions asked. USA has to be near the top for Loot
Laundering from those countries.

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comments

Wild Theories
Correction:

Thu,
07/31/2014 -

22:55 |
USA IS the
5031049
top loot laundering
destination in the world.
The only reason Russians go to UK or Cyprus was because
the US have always been more or less anti-Russian, if the
anti-Russian sentiment didn't exist in the US, even the
Russians would come to US first.
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post comments

tickhound

Thu, 07/31/2014 -

22:44 | 5031021
Um ok. Or the
yuan is surging because of the announcement 8-14
days ago of BRIC banking bypassing western lending
institutions and the dollar.
But whatever Occam's razor isn't always best.
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comments

hobopants

Thu, 07/31/2014 -

22:49 | 5031022
Lol, I'm sure this
will end well. God help us if we ever do get growth,
velocity is going to turn all that liquidity into one hell
of a tsunami.
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comments

Atomizer

Thu, 07/31/2014 -

23:02 | 5031069
The inflow of
illegal wet backs equate to a new subprime housing
bubble, ObamaCare riders & taxpayer revenues.

http://www.zerohedge.com/news/2014-07-31/chinese-stocks-yuan-surge-2014-highs-after-pboc-unleashes-qe

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Chinese Yuan Surges & Stocks Jump To 2014 Highs After PBOC Unleashes QE | Zero Hedge
Watch the blowback erupt.
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Wild Theories

Thu, 07/31/2014 -

23:49 | 5031188
The BofA point 3
about the carry-trade:

I'm not sure at this point if the hot money flow is simply
domestic Chinese hot money looking for a new place to park or
outside hot money yet, it may simply be domestic Chinese
money pulling out of the real estate and going back to the
long-moribund stockmarket and the traditional 'wait for CNY to
rise" game, due more to a lack of other outlets and options
than any geniue belief in investment opportunity.
Of course, the 'wait for CNY to rise' game was originally being
played largely by Japanese money, and the news out of Japan
is increasingly gloomy, again, so maybe there's Japanese
money 'diversifying' out of Japan in there.
I guess the picture may be clearer in a few more weeks, if this
trend continues or picks up speed, if any of that is capital
flow is from the outside, or more importantly, from the west,
or if it's just domestic(or maybe regional - Japan) capital
sloshing around trying to find new places to park.
If outside hot money is indeed flowing back to China, not as a
credit tap for the Chinese but as investment chasers from the
west, as BofA is suggesting... well, guess that means we've
got bigger problems in the west.
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comments

starman
Crist what have
we become?!

Fri, 08/01/2014 00:06 | 5031240

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comments

Luckhasit

Fri, 08/01/2014 -

01:11 | 5031369
Isn't this the point
were my white ZH homies cue up some Johnny Cash?
Cuz this shit is over.
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comments

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