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Chinese Selloff Intensifies As Traders Expect Imminent Rate Hike Following China State Council Comments
In a surprising reversal, the Shanghai Composite has dropped 3% in early trading following a statement by the China State Council which on Monday said it will revise penalties to crack down on price violations to tackle inflation, which has been interpreted by traders as an imminent December rate hike. Per Dow Jones: "Shanghai Composite Index down 2.5%3.0% at 2793.95, faces immediate support at 2750 level. "There has been heightened expectations for an interest rate hike soon, which exacerbated earlier weakness in the index from sovereign debt concerns from Europe as well as a stronger U.S. dollar," says Wang Junqing, analyst from Guosen Securities." More importantly key stat arb pairs such as the AUDJPY and the ESZ/NDZ are being dragged below the surface. On an indexed basis, the ES will soon take out the intraday lows per the AUDJPY. For Brian Sack's sake, we hope the Fed has its midnight crew in tow as this could get ugly fast. We will be following.
Elsewhere a former PBoC head published comments calling for faster cooling, and for the government to begin fighting runaway inflation. One of the mechanisms proposed is CNY reval. Of course, with all the pressure from DC on the CNY, China is far more likely to hike the deposit rate before it actually is seen as acceding to Schumer's demands (to wit: Tuesday CNYUSD fixing at 6.6762 compared to 6.6700 on Monday).
From Market News:
China should shift back to a prudent monetary policy stance to fight inflation because rising prices have become the key threat to the economy, a former People's Bank of China branch head said in comments published Tuesday.
Sheng Songcheng, who was formerly director of the central bank branch in Shenyang, in China's northeast, said that there is more room for the PBOC to raise the reserve requirement, and that deposit interest rates should be increased in order to tame inflation.
Consumer price inflation, which hit a 25-month high of 4.4% y/y in October, is likely to have hit a fresh multi-year high this month, Sheng warned in the Financial News.
"The government should officially announce a shift to a prudent monetary policy to manage inflation expectations...the normalization of monetary and credit conditions is actually a return to prudent monetary policy," Sheng wrote in the newspaper, which is published by the PBOC.
China has raised the reserve requirement five times and interest rates once this year.
A shift away from the "appropriately loose" monetary policy stance of the last two years is expected to be unveiled in the coming weeks. The government ran a prudent monetary policy stance from 1999 until 2006, when resurgent price pressures forced a shift towards a tightening bias.
Sheng noted Chinese household savings fell by CNY686.5 bln in October because of a widening negative interest rate and that money is flowing into the stock market, property sector and even consumer goods, fueling inflation and asset bubbles.
"Allowing deposit rate to float up will help to correct negative interest rate and curb inflation," Sheng said.
Gradual and modest yuan appreciation is also still the best choice for exchange rate reform as it gives Chinese exporters time to adjust and also eases imported inflation pressure, Sheng said
Finally, Reuters China, citing, China International Capital Corporation, had this to say (whoever has a better translation please chime in):
"We expect between now and 2011 will likely raise interest rates twice by 25 basis points, due to short-term inflationary pressures are likely to exceed expectations, we believe that the end of this year and early next year, months before the rate hike has increased."
But do not think gold will increase the interest rate increase, but the point rate hike may be ahead. As the second half of next year, CPI inflation down, which will reduce the pressure to raise interest rates.
The investment bank also said that if inflation rose sharply than expected appreciation of the renminbi will become more important than the interest rate tightening tool may accelerate the pace of appreciation. Expected effective exchange rate of RMB to the next 12 months increased by 5%. Due to appreciation of the renminbi would help commodity imports in the relief brought by imported inflation.
h/t London Dude
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Certainly looks ominous
Another complete idiot
Say no more.
Translation- the ongoing dollar/Rmb price of gold will not influence interest rate policy.
I guess he is covering his ass for when gold makes a big move.
It's not about gold: the translation is missing the key point totally here.
Here is my translation: "In the case of the listed company "central Gold", the current round of price increase is mainly driven by cyclical demand. One can not over estimate the structural factors including the rising cost of labor and the short term impact of inflation. Considering the recent policy changes, the expected result is reduced inflation in the 1st quarter of next year."
I don't have time to translate the whole piece but that part I'll clear up, that is a machine translation error. For the most part this guy has little interesting to say, mostly pretty squaking for the sake of being heard. Most is rehashed "market expectation" CPI target, 2 expected rate rises, M2 projection, etc. His statement that the real estate market is unlikely to overheat next year has me chuckling though.
He is from the China International Capital Corporation, not the "Central gold corp"
My translation makes more sense.
Sounds like the Party is terrified with the inflation going on.
Early signs of world hyperinflation? Too early. Big inflation, yes, but hyperinflation will come in late 2011.
What is the basis for your timeline?
The way I see it, it could happen at any time, and is wholly contingent upon the actions of foreign central bankers.
Mainly on the propagation speed of money and then, far later, the price/margin adjustment in producers and resellers. It will come sooner than in 3 years, that's for sure, but it can't come in one month all of a sudden. Those who define prices are those who sell. For now, producers and resellers seem to prefer cutting their margins and losing money/reducing the quality or quantity/ than increasing prices. That will change when half of these companies will go bankrupt.
I tend to agree with everything except for the "it can't happen within a month" part. I think it's going to happen a lot faster than most people seem to think. You might not go to sleep with what you have now and wake up with nothing, but you could wake up to find your purchasing power cut by 25% or half, and have lost 50-90% more by the end of the day.
That's what's going to happen /during/ hyperinflation. I of course talk about the starting point.
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Hyperinflation is the loss of faith in currency. I don't see how you can put a timeline on a mob mentality. Narrow it down to a decade maybe.
Practically, hyperinflation in Weimar germany started when the average mom realized that the price of dry sausages in butcher's shops was doubling each month since a while, and that it would be better to buy a lot right now. No 'complex' reasoning here.
Tyler, you're killing me tonight. Just when I think I can relax.
There is no relaxing, so relax.
There exists no Santa in China
rofl
It's best to be two people when assembling happy fun toy
damn, that's funny.
buy em
China inflation = China rate hikes = building stops = China jobs slowdown and raw material exporters to China slowdown = S+P 500 growth (from BRICs) collapses....which means buy buy buy!!!
Isn't that how the equation works? No matter what...buy buy buy stocks!!!
Only on the American market. !
Every other market is getting "CRUSHED" except for the U.S.
Do we have a double POMO tomorrow ?
http://www.sgxniftydowfutureslive.com/index_files/DOWFUTURES.htm
Man, Look at that Italian Market !
"La merda sta per colpire la ventola"
Rutt Row !
Only thing to take away the 13 month 2009 rally was the European situation in Greece past may.
Why wouldn't the world markets fall apart amidst Ireland, span and portugal going down too.
That news, black Friday hyping and even two pomos kept us red today so it's serious shit.
Anyone know why oil is last nights erection right now? Cuz my dolla is up.
Not to mention the 30th has some celestial thing that "counts" there.
Been saying for weeks ....
China will issue her 7-8th rate hike by middle of 2011 ... Boom !!! Bubble Pop !
Food inflation up 10 % YoY
http://www.youtube.com/watch?v=4Hu-m53qLsU
http://www.youtube.com/watch?v=YLsyjyZDz7s
http://www.youtube.com/watch?v=xFLHMm-Hhxc
First 9 days in nov. garlic up 95 % ...
I doubt there is much the Plutocrats in China can do to stop inflation.
Price controls, rate hikes, etc. will simply cause the CRB Index to rise even faster.
Of course, high commodity prices means more new highs in restaurant stocks, specialty retailers, etc. which seem to accelerate when a convulsion hits the financial markets.
""high commodity prices means more new highs in restaurant stocks,""
WTF? Yeah, I always go to Morton's when markets implode and food prices explode because I know there I can share a stogie with a well fed Chinese politico and not have to fight with the masses for a table.
I think he was joking man...
I think....
Higher dollar equals lower commodity because yuan is pegged to it. So raise the dollar.
Fan the eurozone crisis and koreas fighting will do nicely.
When this dollar his 88 you're gonna see some serious shit.
No, thats not how it works.
Its just the opposite
Higher dollar means that China is printing more RMB to put a bid under the dollar.
Higher dollar=more inflation in China.
How do you figure rate hikes in China won't slow the CRB index?
Prices so bad in china that poor people can't buy food. A rate hike and higher crb will end any growth there.
All China has to do is revalue the RMB higher to stop the inflation. When the RMB is higher, commodities priced in dollars cost less.
The way China will revalue is they will buy less dollars. As China gains purchasing power, the US loses purchasing power because the dollar will fall as much as the RMB rises.
Revaluation would do the trick which means higher interest rates for the US.
China revalus by printing less RMB to buy dollars.
I would love to see them re-value, but that opens up Pandora's Box for the US housing market via the interest rate rise you mention.
Yes, but thats not China's problem, inflation is China's problem.
Plus the Fed can just pick up the tab and buy everything for ever.
The export equation gets ugly when the US housing market melts down though, but at some point they will have to cut the rope.
At this rate, the Fed could probably QE their way to covering future Chinese treasury purchases too. All it will take is a little fear on the part of the populace and government. I'm sure a drop back to 900 in the S&P would suffice.
Yeah but the way it works is, if the Chinese pay less for food and gas, they have more discretionary income to spend on other things. Rather then the American buying the iphone, the Chinaman does instead.
I think people are finally catching on to Robo's sense of humor :)
Took that; short AUD/JPY at 80.90, stp 81.40. 1st target 80.00, 2nd T at 79.00.
6A
http://99ercharts.blogspot.com/2010/11/6a.html
http://www.zerohedge.com/forum/99er-charts
If the ChiComms were of a mind to bring down western civilisation, they could start with a rate hike now and save the missiles for later.
"fueling inflation and a$$hat bubbles"
Rut ro raggy, no cyber Monday uber goodness for their market? I don't get it, 3/4 of the stuff I bought today online was made in china....
What? You say that the Chinese are not going to lay down for CME speculators? No? Cannot be true.
The criminal syndicate known as Wall Street will not be happy about this slight. After all, they sent the entire Fast Money crew out on the set tonight to scream "Buy oil!" Never mind the fundamental picture.
Wow. I wonder how this will be resolved...maybe a complete commodity price collapse?
No?
What will be the development that moves stocks beneath the 1170-1175 zone? Is a China rate hike rumor enough?
The EUR-USD is heading downward again, and might test the day's lows here pretty soon.
WTF is this ?
World Trade Center Tower III
http://en.wikipedia.org/wiki/China_World_Trade_Center_Tower_III
The Chinese will bootleg anything... even a building.
they probably built it with scrap, they bought, from the original
Centerpiece of the new DizNee Park?
Do not want to own any stocks besides miners, gold and silver. When it turns, it is going to be really ugly. Just sit on the sidelines for now. Our turn at bat is coming all, let the game play out. Patience is key. From China to Ireland and US in between. Man oh man.
Me and you, pal. Gonna make a run to Sam's for more popcorn.
Can I get ya anything?
EUR/USD 1.30794 and dropping like a rock.
This is the space between midnight and 3AM EST that the ECB would most likely step in to support the Euro. They may be doing that right now.
2008 redux---reality suspension begins officially at noon tomorrow in the world's dumbest "market".
China is already over 5% on rates. Their problem is not rates. Their problem is their dollar exchange rate which has them importing inflation by the ton. They need to revalue and let their stronger currency allow them to pick up their lost export demand internally.
+10000
dead on.
"But do not think gold will increase the interest rate increase, but the point rate hike may be ahead"
this is very deep analysis and think we should all ponder this point very carefully.
He is saying that they will not use the price of gold in dollar/RMB to gauge inflation.
.
If the global economy collapses, maybe real Rock and Roll will return.
"Inflation" is the number one and only super bogey man for China. It haunts everyone from the shit kickers in the Big West to the CPC Central Committee. Its the central reason the GMT lost control despite the bigger military complex and all the foreign support. When CPS meets to rationalize their success against the GMT post WW2 it always comes down to crazy food prices and stories of somebody's father eating tree bark to stay alive. It then repeats for the great leap, the CR, re-education, prison, etc etc.
Having run numbers for these guys myself, the mark of inflation, unemployment, growth, and all the fancy metrics from all these new financial markets with zero corporate governance experience are no more trustworthy or relevant than say the US employment numbers generated by the BLS. Like fiat currency, perception is your reality.
China's biggest mistake going forward is trying to duplicate, rationalize and otherwise adopt the rules created by outfits like the FRB, IMF and the BIS in the West. Inflation is the only weapon the Western powers have against China and I dare say they are ready to otherwise pump China's internal econ metrics and affected political decision making apparatus as if they were parachuting into occupied France with Aaron Bank on a moonless midnight.
If China wants to kick off the century in style, then they better look to some ascending "yang" econ state to compliment how the West has seemingly "failed." Offer a counter argument a la Dong Zhongshu and stop playing into the hands of the smartest guys in the room.
Inflation leads to Liu Chao and we all know the West would delight to breathe a little easier with a little inward China chaos.
I totally agree with you.
And when those Chinamen finally figure out how many soybeans make five...well....
HEY OUT THERE - CHINA EXPERTS - Want to ROTF and mother fucking laugh - A LOT
Read the Wikileaks China/Korea notes on the Telegraph - holy shit - if that ain't some funny, funny stuff - Really, the rest of you, who haven't spent years negotiating with the Chinese, might not get it, but it's VERY funny... I would LOVE to have been there and watched these guys feed this BS to HR Clinton with a straight face - FUNNY, funny stuff!
http://www.telegraph.co.uk/news/worldnews/asia/northkorea/8169468/WikiLe...
OMG, they haven't the slightest respect for our diplomatic corps.
TD - pick up on this!
Yeah man but that wilkileaks guy - he's been charged with rape and sucking his own nob in sweden so it must be true - and so thats good enough for me.
Its all the way with LBJ for me man.
The real story wouldn't have Hilary being misled and treated like a naive numpty.
What is she an idiot?
No need to answer
China would never allow the unification of Korea unless the agreement called for the exit of the US military from the peninsula. If the US was to gain control of North Korea, China would be forced to conscript, train, feed, arm ..etc huge numbers of personnel to protect the border. The cost of this would dwarf any support they send to North Korea now.
China in the present may have a ton more trade with the South versus the North, but the North controls 85% of the resources on the peninsula. With Chinese wages rising, South Korean companies will move their manufacturing away from China. As more and more of the Chinese mines in North Korea come on line, the North only becomes more important. Add the fact that North Korea has ownership, mineral and fishing rights to waters off it's coast and you can see the importance of North Korea to China.
I WARNED YESTERDAY ABOUT A SHORT SQUEEZE IN ES FUTURES. TODAY WILL BE EVEN MORE BRUTAL SQUEEZE. YOU DON´T LISTEN. POMO x 2 WILL SHOW YOU THE WAY...
They can raise their rates as much as they like, but they wont keep on getting their commodities as cheaply any more....the game is up.
Beats me why Gold should go down if China ups interest rate. The main speculation is in real estate and in stocks. And besides the Youan will become stronger and the US$ weaker. Which means Gold should go up further.
Methinks Bloomberg et al are handing out false leads and ideas.
Beats me why Gold should go down if China ups interest rate. The main speculation is in real estate and in stocks. And besides the Yuan will become stronger and the US$ weaker. Which means Gold should go up further.
Methinks Bloomberg et al are handing out false leads and ideas.
The Chinamerica is like a bigger and scarier version of Europe, isnt it? Why should you hold USA treasuries with the low yield when you can hold the Gold instead?
I think that the China is going to find out manipulating the market ends up like holding the tiger by its tail...The danger grows and there is no way out
I don't see why the rest of the world should have their living standards drop because the China is overpopulated.
Overpopulated?
The SEIU should unionize the Chineses workforce
Better Pay Less Hours
Rather than increase USA worker compensation
I remain big time short FRN's (cash) and am ching-ching the E/S gold and oil. Cash is trash. Just ask Benny and Co......
So is this inflationary for the US dollar or deflationary
For Gold?
Is the invisible hand at work?
Or Chairman Bernacke?
old polish adage (revised): under chinese communism man exploits man. under western corporate fascism the reverse is true.