This page has been archived and commenting is disabled.
China Options Limited As Repo Rate Hits Record
We’ve said on a number of occasions lately that China is currently stuck between a rock and a hard place and may have no choice but to join the global QE party (perhaps by purchasing local government debt). On a REER basis, the yuan is the second most overvalued currency in the world and as Soc Gen recently noted, that’s hurting the Chinese economy at a time when it can ill afford further headwinds. Unfortunately, devaluation could risk exacerbating capital outflows at a time when data on FX deposits for corporates suggests nervousness abounds about the near-term outlook for the yuan. We summed up the situation as follows: devalue too much, and the capital outflows will accelerate, not devalue enough, and the mercantilist economy gets it.
As Bloomberg reports, evidence that the PBoC is being pressured on both sides hasn’t abated, as interbank rates hit record highs:
The seven-day repurchase rate was 4.41 percent on average so far in 2015, up from 4.16 percent a year earlier and the highest for the period since the fixing began in 2004. Australia & New Zealand Banking Group Ltd. and AXA Investment Managers Ltd. see a reserve-requirement ratio cut this month, while Barclays Plc. predicts one “in the coming weeks.”
Two benchmark interest-rate reductions and one lowering of banks’ reserve ratio in four months failed to bring borrowing costs down, as the world’s second-largest economy faces capital outflows that drain cash. Premier Li Keqiang told reporters Sunday that policy makers will act if growth, which the government targeted at about 7 percent this year, drifts toward the lower limit of its range and cuts into employment or wages.
With money getting tighter and with the risk of imported deflation rising, expect further easing sooner rather than later.
“I’m in the camp expecting a reserve-requirement cut,” Rajeev De Mello, who manages about $10 billion as head of Asian fixed income at Schroder Investment Management Ltd. in Singapore, said in a March 12 interview. “Interbank rates are not showing any signs of coming down. That worries me a bit because that shows liquidity in China is still very tight”...
“Export growth will not be enough to offset domestic weakness,” said Aidan Yao, a Hong Kong-based senior economist at AXA Investment, which manages $660 billion of assets globally. “Without lowering interbank rates, banks will unlikely pass on the latest rate cut to borrowers. We think the next move for the PBOC is to cut the reserve ratio, possibly before the end of this month.”
That’s all well and good, but again, easing risks spooking FX markets and accelerating capital outflows and indeed, some still contend that the government may be willing to tolerate some economic pain if it means countering devaluation jitters. Here’s more from Bloomberg:
China’s effort to keep yuan relatively strong suggests govt’s concerns about capital outflows outweigh the harmful side-effects a high currency can have on exports...
Yuan’s REER vs major trading partners is 3.06 standard deviations higher than the average since start of 1995, based on BIS data; that’s the largest deviation among the world’s 10 biggest economies…
Yuan’s REER has risen on the back of the currency’s “soft peg” to the dollar, Shi Lei, Beijing-based head of fixed- income research at Ping An Securities, said in March 13 interview. “The PBOC thinks currency depreciation will create instability in the financial sector.”
In the end, there really isn’t a right answer here, which is why, as we noted almost two weeks ago, Chinese QE could be right around the corner:
China is suddenly finding itself in an unprecedented position: it is losing the global currency war, and in a "zero-sum trade" world, in which global commerce and trade is slowly (at first) declining, and in which everyone is desperate to preserve or grow their piece of the pie through currency devaluation, China has almost no options…
...an ongoing deterioration in Chinese economic conditions, coupled with a weaker, but not weak enough, currency, [means] the PBOC [will likely] first go to ZIRP, and then engage in outright QE.
- 12951 reads
- Printer-friendly version
- Send to friend
- advertisements -


How does one profit from this?
Well, by buying Gold of course!
Though you won't profit in the strict sense of the word, you will guarantee that your purchasing power won't decline.
No! Buy Silver!
Another bank in trouble:
"Customers of the Spanish bank withdrew significant amounts of funds, leading to a “strong deterioration” of its financial situation, according an e-mailed statement Monday from Banco of Spain, the central bank. Client deposits of up to 100,000 euros ($105,000) are guaranteed by Spain’s deposit-guarantee fund, the central bank said"
http://www.bloomberg.com/news/articles/2015-03-16/banca-privada-d-andorr...
I knew that...I meant in the paper sense.
There's someone clever on ZH that knows exactly how to make money off of disaster. I'm feeling greedy tonight, but I'll be over it in a few hours.
Yen, Paging Doctor Yen. Please report to the nearest NSA terminal (the implication is the NSA is listening so don't get ur panties in a bunch, unless you use Cottonelle then you are going commando and don't have any panties on. But I digress).
Can you imagine the insider trading possible if you worked for the NSA?
my roomate's step-mother makes $79 hourly on the laptop . She has been fired for 10 months but last month her pay was $18694 just working on the laptop for a few hours. see here... www.globe-report.com
Perform a reverse buyout of a private company and release an IPO
Skim off cash
Borrow heavily, and expand rapidly.
Skim off cash
Produce mass quantities of product. That which you don't sell, you securitize, and either use the securites as assets to borrow more money - or - sell the securities.
Skim off cash
When auditors come knocking, either pay them off, or go cap in hand to Washington for a bailout
Skim off cash
Buy usd hedged A shares. See other ZH article on shadow banking buying.
Or Platinum?
Sometimes the Pozzie just runs out of Suckers....
Since when does a mercantilist care about the value of the money?
They love inflation and low rates.
Just ask Japan or Germany...or Greece for that matter (unfortunately for them.)
Everyone says their for free trade of course.
In the end its all about the bailouts though is it not?
But China has all the real gold.....they are fine......these mofo's are stuck in a box and the zionist/mericans have them by the short and curly's.
since 20 years they do conceal the gold holdings.
Given their position, as the wolrd's biggest gold producer, the production of cca. 400 tons/year syas, that only within the abovementioned 20 years they have produced 20*400=8000 tons of gold.
who knows, hom much they acquired from western CBs?
One can expect, that their gold valutes hold from 15000 tons to 20000 tons of gold.
10% of the total earth gold holdings (somewhere at 192.000 tons)