Hong Kong

A non-bombastic analysis of the events and data in the week ahead, with insulting anyone or resorting to conspiracy theories.

Having claimed 'foreign interests' were "waging an economic war" against China, it was ironic that the most outspoken of Chinese SOEs is now under investigation for 'selling' shares when it was told not to. As Reuters reports, China is extending its dragnet for "malicious sellers" to Hong Kong and Singapore as the witchhunt blame-mongery continues, Rather ominously, the China Securities Regulatory Commission (CSRC) has demanded trading records to try to identify those with net short positions who would profit in case of further falls in China-listed shares, three sources at Chinese brokerages and two at foreign financial institutions said. Even more incredibly, as Bloomberg reports, despite total ignorance by US regulators, China is 'daring' to crackdown on market manipulation via 'spoofing'.

In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower.  This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% - the biggest loss among 93 global benchmark gauges tracked by Bloomberg.

During a short stay in Shanghai a few weeks ago on unrelated business, we had an opportunity to witness the ground zero of the China market frenzy at its peak and its nascent plunge. Chinese retail investors make up 85% of the market, a far cry from the U.S. where retail investors own less than 30% of equities and make up less than 2% of NYSE trading volume for listed firms in 2009. Combined with the highest trading frequencies in the world and one of the lowest educational levels, describing China’s market as immature is an understatement.

• Second-quarter GDP seen rebounding on consumer spending, housing (Reuters)
• China Stocks Fall as Traders Puzzle Over Sudden Late-Day Swings (BBG)
• European 'alliance of national liberation fronts' emerges to avenge Greek defeat (Telegraph)
• Thomas Cook warns on earnings over Greece (MW)
• Largest Greek toy seller Jumbo warns of hit from capital controls (Kathimerini)
• Chevron and Exxon Get the Plaudits, but Some Smaller Drillers Faring Well (WSJ)
• Schäuble outlines plan to limit European Commission powers (FT)
• UBS Deal Shows Clinton’s Complicated Ties (WSJ)

With the major US equity markets within 1-2% of their record highs, Gavekal Capital notes that underneath the headline indices, stock markets are extremely tumultuous. Rather stunningly 21% of MSCI USA stocks are at least 20% off their recent highs, and 68% of Canadian stocks are in bear markets, but the real carnage is taking place in Emerging Markets.

• Fed expected to push ahead with rate hike plan (Reuters)
• Upbeat earnings lift European stocks ahead of Fed (Reuters)
• Chevron to Cut 1,500 Jobs (Rigzone)
• Can Windows 10 Revive PC Sales? (WSJ)
• U.S. Junk-Bond Buyers Left in Dark as Private Deals Become Norm (BBG)
• Jeb Bush Drawing Big Bucks From GOP Establishment (WSJ)
• Myriad of Greek Risks Means Money Managers in No Hurry to Return (BBG)
• Gas production at Gazprom set to hit post-Soviet low (FT)

Despite the reassurances from western media and talking heads that China is unimportant (both its stock market and economy), Asian economies continue to show signs of contagion from China's slowdown as Thai exports weaken and Hong Kong trade tumbles. But it is the blame game that is top of mind tonight as Chinese regulators switch attention to Hong Kong brokers in their "investigation into malicious sellers." As SCMP's George Chen notes, first they blame a "foreign force," and now they blame Hong Kong, always careful not to blame themselves. After 3 down days, Chinese stocks look are opening slightly higher as there is little follow-through from yesterday's PPT rescue or today's panic-buying in US markets especilaly in light of an additional $100bn injection into the sovereign (rescue) fund.

• Fed Officials May Offer More Clarity on Rates (WSJ)
• Stocks rebound, shrugging off volatile and weak China (Reuters)
• Three-Day Selloff Knocks 11% From China Shares (WSJ)
• China shares fall again as Beijing scrambles to calm markets (Reuters)
• VAT hikes to make Greek destination less popular (Kathimerini)
• Varoufakis - Something is rotten with the eurozone’s hideous restrictions on sovereignty (FT)
• EU denies Varoufakis 'tax control' claims (FT)

For the first half an hour after China opened, things looked bleak: after opening down 5%, the Shanghai Composite staged a quick relief rally, then tumbled again. And then, just around 10pm Eastern, we saw a coordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members, that sent the USDJPY soaring which in turn dragged ES and most risk assets up with it. And while Shanghai did end up closing down -1.7%, with Shenzhen 2.2% lower at the close, the final outcome was far better than what could have been, with the result being that S&P futures have gone back to doing their thing, and have wiped out all of yesterday's losses in the levitating, zero volume, overnight session which has long become a favorite setting for central banks buying E-Minis.

• Chinese shares tumble 8.5 percent in biggest one-day drop since 2007 (Reuters)
• Japan’s Economy Shrank Last Quarter, Top Forecaster Says (BBG)
• Creditor teams in Athens to work on third bailout (AFP)
• Tsipras’s Paradox Is Six Months of Pain and Enduring Popularity (BBG)
• Goldman-Backed Instant Messaging Company Seeks New Investment (WSJ)
• Best Buy will sell the Apple Watch on August 7th (Engadget) - when is it coming to Dollar General?
• Senate votes to revive Ex-Im (Hill)
• U.S.-Turkey Deal Paves Way to Set Up Buffer Zone in Northern Syria (WSJ)

• Gunman kills two, wounds seven in Louisiana theater before killing himself (Reuters)
• Health insurer Anthem to buy Cigna in $54.2 billion deal (Reuters)
• Murder, Poisoning, Raids: It’s Election Season in Russia (BBG)
• Lagarde Push for Greece Debt Relief Challenges Merkel (Bloomberg)
• Fund Boss’s Gamble on Health Law Pays Off Big (WSJ)
• Wall Street Cranks Up Its Outlook for Amazon After It Delivers Monster Earnings Report (BBG)
• China's Richest Man Marks Push Into Hollywood With Jake Gyllenhaal Movie (BBG)
• West Africa's alarming growth industry - meth (Reuters)

Fast forward to this morning when in yet another Reuters piece, we "find" that the narrative has shifted once more and that now, "traders from Hong Kong to New York are pointing the finger at others for being behind the move while struggling to unmask the mystery sellers." In other words: the "hunt" for the great gold "bear raid leader" has begun.

There could be trouble ahead....

The manipulative smash on the gold price on Sunday night has once again led to a surge of buying of gold coins and bars across the globe. Both the Wall Street Journal and Reuters report on how bullion dealers are seeing a spike in demand for gold coins and bars in  India and China and indeed Europe, Australia and the U.S.