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Chinese Stocks Tumble As Offshore Yuan Surges Most In 2 Months After Apparent PBOC Intervention

Tyler Durden's picture




 

Update - Chinese stocks continue to plunge...

 

Aside from 3 very small adjustments, The PBOC has fixed the Yuan weaker for the last 20 days, driving the mid-line to 6.3962 - the weakest since August 28th.

 

Which was followed bya massive intervention sending Offshore Yuan 0.35% higher and crushing the Onshore-Offshore spread...

 

 

As Offshore Yuan strengtnens most in 2 months...

 

After Chinese stocks collapsed on Friday, they are holding the losses for now as the biggest question remains just what the weighting will be for Yuan inclusion in The IMF's SDR basket (which looks set to be announced tomorrow - US time).

 

Although none of this is likely to end well unless China unleashes something big...

 

And metals continue to collapse...

  • *SGX ASIACLEAR IRON ORE FUTURES DROP 3.7% TO $39.29/TON

And brokerages...

  • Haitong Securities -9.2% after being suspended Friday amid CSRC probe; Citic Securities -1.7%

But the biggest question surrounds The IMF’s decision today (tomorrow) over yuan inclusion in SDR basket (and the actual currency weighting).

IMF’s calculation, based on value of exports of goods & services, suggested a 14%-16% weighting in the $280 bln basket. The yuan fell to a three-month low on Nov. 27 on concern it may have only 10% share of the SDR as formula expected to change, analysts said.

 

A 10% or less weighting will lead to selling, says RBC strategist Sue Trinh. Yuan fell 2.95% ytd, the biggest decline since 1994, as economy slowed and PBOC devalued the currency in Aug. PBOC could widen trading band to 3% or 4% after SDR entry, says Xu Yuehong, analyst at Bank of Communications.

Market expectations:

Eddie Cheung, Hong Kong-based FX strategist at Standard Chartered:

5% of world FX reserves will be in RMB by 2020, with 1% allocated annually to the currency, or $85b of inflows each year; may support Chinese bonds

 

USD/CNY at 6.50 by end-2015; 6.55 in 1Q 2016; 6.42 end-2016

 

Likely weighting of 10% in SDR basket based on expectation IMF will change formula and cut export focus

Khoon Goh, Singapore-based senior FX strategist at ANZ:

As currency isn’t fully convertible, weight could be 10%

 

Capital inflow to increase $230b over next 3-5 yrs, with allocation of yuan in global reserves rising to 4.0% from 1.1%

 

China needs to make bond market and assets more accessible for foreign funds, which would also improve liquidity

 

PBOC likely to intervene less frequently in 2016 compared to this year

 

NOTE: Net capital outflow reached $731bln in the 10 mths to Oct.

Xu Yuehong, Shanghai-based analyst at Bank of Communications:

PBOC could widen yuan trading band to 3% or 4% after SDR entry

 

Any near-term boost to yuan from SDR entry likely offset by strengthening dollar on bets Fed will raise rates

 

PBOC will probably want to avoid sizable and sudden capital flows, so any loosening of controls, expansion of QFII quotas, will be very gradual

Fiona Lim, Singapore-based senior FX analyst at MayBank:

Yuan weighting in SDR basket is estimated at 13-14% according to 2010 calculation method

 

After SDR entry, yuan may have moderate depreciation as PBOC eases with slowing economy, with the central bank intervening intermittently to smooth out volatility

 

IMF may want China to further liberalize capital account, which would be negative for CNY given macroeconomic conditions
Inflows will be gradual as the new basket will only take effect in Oct. 2016

And finally, before everyone gets too excited - The history of yen internationalization offers a cautionary tale on hopes for the yuan.

Japan’s experience suggests that a floating exchange rate, free cross-border flows and stable economic growth are all necessary for successful internationalization. The challenge for China will be hitting all three of those criteria.

 

 

Currency internationalization comes in three stages. The first is use in trade settlement and financial transactions. Second is providing a safe asset for investment by non-residents. Third is to serve as an anchor for the regional and -- ultimately -- global market. In the 1980s and 1990s, the yen made rapid progress from stage one to stage two. Since then, it has stalled and even started to retrace its steps in some respects.

Finally, why Chinese stocks may be persuaded to stay weaker for longer...

To scare The Fed off again.

 

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Sun, 11/29/2015 - 21:40 | 6854616 nmewn
nmewn's picture

Vice Public Security Minister Meng Qingfeng asks "the masses" for calm & trust while they try to sort through (again) this issue of Keynesian weaker/stonger currency for their labor.

(Sigh)

Sun, 11/29/2015 - 22:14 | 6854688 Kitler
Kitler's picture

It's about time to get this new IMF global fiat currency started before everything turns to shit

Russia and China's bankers have been demanding it now for over a decade

http://www.themoscowtimes.com/business/article/at-g20-kremlin-to-pitch-n...

China and Russia are also interested in the establishment of a multipolar UN government with real power to make the difficult decisions that nation states alone can't   Every citizen on the planet will get a vote for the prescreened UN candidate of their choice

"The great problems of our times – such as war, disease, poverty and climate change – cannot be solved by individual nations acting alone. Direct citizen representation could help the world develop a greater understanding of itself as a global community. At the highest levels of the United Nations, a UNPA could function as a world conscience and watchdog, and a catalyst for further reforms. Over time, the UNPA could evolve from a consultative body to a world parliament with genuine rights of information, participation and control."

http://en.unpacampaign.org/about/unpa/index.php

Sun, 11/29/2015 - 22:22 | 6854777 nmewn
nmewn's picture

Oh thats just excellent!

Pre-screened NWO candidates of our choice you say? How do I get myself on the world committee of pre-screeners or should I just develop my own alliances to appoint myself as world potentate? ;-)

Sun, 11/29/2015 - 22:31 | 6854800 Kitler
Kitler's picture

Successful candidates will possess numerological skills to a 33rd degree level

Mon, 11/30/2015 - 01:48 | 6855293 kiwimail
kiwimail's picture

It helps if your name is Hilleerie.

Sun, 11/29/2015 - 22:35 | 6854827 TradingTroll
TradingTroll's picture

Yes and after the IMF  currency is issued all politicians  become honest? You know, unicorns  flying out their asses 24/7 and shit? Oh yeah and all the three letter institutions  disband also? And all the unelected  leech appointees  quit due to guilt? Israel gives Palestinians  their land back?Or just more of the same?

 

 

Mon, 11/30/2015 - 00:54 | 6855184 nmewn
nmewn's picture

He was being facetious, there is a fine line between good sarcasm and showing the long term goals of the elites to others.

The trick is knowing the difference ;-)

Sun, 11/29/2015 - 21:44 | 6854626 bunnyswanson
bunnyswanson's picture

Destroying the purchasing power of a currency is an act of war

https://www.youtube.com/watch?v=ILKolTI1s50 2 years ago - Senior Obama Official - "We are going to kill the dollar"

http://www.ft.com/intl/cms/s/0/fd81211a-96a9-11e5-9228-87e603d47bdc.html...

“There is no politics in this,” said a senior IMF official."

Let's take a moment to thank our military members for aiding and abetting the enemy!

Sun, 11/29/2015 - 22:15 | 6854757 Lets Buy The Dip
Lets Buy The Dip's picture

anyone know why the yen went crazy today?

China is getting close to a really nice buy longer term. I think. Go against everyone out there calling for a crash.

THIS STORY HERE <=  Is about a trader who lost $200,000 USD and trying to get people on crowdfunding to pay him back. LOL

you see all these traders who think you just SHORT in a bull market, and sit back, and smile. Only weeks later to have everything taken from them. 

I would not be surprised to see 2016 being one of the biggets bull markets on record? WHY? because every is getting so BEARISH again!!!

Sun, 11/29/2015 - 22:30 | 6854807 jamochavez
jamochavez's picture

Your a genius

Sun, 11/29/2015 - 22:19 | 6854770 DirkDiggler11
DirkDiggler11's picture

Too bad the Chicom's can't export their air pollution. You reap / breathe what you sow...

Sun, 11/29/2015 - 22:41 | 6854847 pachanguero
pachanguero's picture

DXY is headed up for all the wrong reason.....

Mon, 11/30/2015 - 00:04 | 6855045 Yen Cross
Yen Cross's picture

 So much for that , "internal consumption",  stronger " arms stretching" yawn... idea?

 Cheap Chinese flatscreen TV's have derailed global domination, and sand castle building. lol

Mon, 11/30/2015 - 00:42 | 6855154 hedgiex
hedgiex's picture

In the struggle to keep domestic interest rate stable and low to avoid an implosion, they have to let the currency go with intermmitent intervention. Yuan's inclusion into the basket is a non-event. 2016 will usher in a year of more volatilty plays on the Yuan and with it the carry trades. The juices not in their equities and private sector bonds where they can use brute laws to burn you. The big bites come when PBOC loses its credibility as perceived by the markets in the midst  of funds outflows They are running out of options but to use their printing press. 

Mon, 11/30/2015 - 01:13 | 6855224 mijev
mijev's picture

Any guesses as to what happens to the yuan/usd peg after the IMF decision? I've read somewhere else that the dollar's recent strength could also be attributed to the yuan getting stronger and pushing the USD higher.

Mon, 11/30/2015 - 02:29 | 6855297 Yen Cross
Yen Cross's picture

 WTF? *SGX ASIACLEAR IRON ORE FUTURES DROP 3.7% TO $39.29/TON

 Asiaclear?

 This looks interesting Tyler > China Chengxin Credit Rating Group - Wikipedia, the free encyclopedia

 

 

Mon, 11/30/2015 - 05:29 | 6855517 SoDamnMad
SoDamnMad's picture

Looks like the PBOC PPT just bought another 1% of the market and turned things around.  Oh thank you government. Stawks always go up. Wight or wong?

Mon, 11/30/2015 - 05:35 | 6855521 Junerberno
Junerberno's picture

Powerful manipulatuion over the last hour. Infinite power.

Mon, 11/30/2015 - 06:06 | 6855537 Junerberno
Junerberno's picture

Is anyone else shocked we have for the first time endorsed the currency of a nation that is a military dictatorship? 

Mon, 11/30/2015 - 06:10 | 6855541 Ghordius
Ghordius's picture

it's more properly a one-party dictatorship, with the party's role in military matters being currently reinforced. and actually, no. it is the logical progression from "Nixon going to China" up to iPhones being made in China

Mon, 11/30/2015 - 06:14 | 6855545 Junerberno
Junerberno's picture

I suppose Singapore is an analogue, but at least Singapore pretended to have elections (although their laws made it essentially illegal to oppose the ruling party by making criiticism of that party a crime).

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