China Contagion Spills Over To Hong Kong Banks As HIBOR Explodes To Record High, Stocks Tumble

Tyler Durden's picture

Chinese stocks are trading at the lows of the day after Overnight HIBOR rates (Hong Kong's interbank borrowing rate) exploded a stunning 939bps to a record high 13.4%. It is clear that banks are utterly desperate for liquidity and/or are extremely concerned about one another's counterparty risk. This has dragged HSCEI down 5% (to its lowest since Oct 2011).

Something just snapped...

 

Evidently the pressure between On- and Off-shore Yuan was too much for banks to bear...

 

Smashing Hang Seng China Enterprise Index down 5% to its lowest since October 2011

 

But US equities are being bid by an invisible hand once China closed for lunch...

 

Chinese Default/Devaluation risk just jumpe dback above 120bps (highest since August collapse)

As we explained earlier, as Asian markets opened (ahead of the Yuan fix), they were in turmoil with FX markets crashing (JPY rallying as carry trades unwound), equity markets tumbling (Dow, Nikkei, and China A50), commodity carnage (crude and copper carnage) as Gold and bonds were bid. With offshore Yuan sliding ahead of the fix (and Onshore Yuan 3 handles cheap to Friday's fix), CFETS RMB Index dropping below 100 for the first time, and following Friday's 'token' stability, The PBOC decided to hold Yuan Fix practically unchanged for the second day. USDJPY and equity markets jumped on the news, then quickly faded.

 

We have seen this "stability" before...

 

Asian stocks collapse to lowest since October 2011...

 

Chinese media is pushing rumors of rate cuts and urging people that they do not need USD (despite the lines we noted earlier) demanding theyhave more patience... (via People's Daily)

More patience is needed for the Chinese economy which is in a transition period, as it transfers from old to new economic growth drivers while also facing a backdrop of a slowing global economy, the People's Daily reports citing academics. It would be too opinionated to judge that the Chinese economy would suffer a hard landing based on short-term fluctuations as many factors have had an impact on the yuan's recent depreciation and the stock market's falls.

 

"The fundamentals of many economic crises is the psychological panic problem, and we need to take good care of the market and foster new drivers; conclusions on the Chinese economy can't be made in a rush based on the short-term or partial changes," said Zhang Tiegang, professor at the Central University of Finance and Economics.

Yeah - all psychological.

Offshore Yuan was tumbling before the Fix...

 

As were Chinese stocks:

  • *FTSE CHINA A50 JANUARY FUTURES SLIDE 3%

Of course, The Keynesian have a solution for all this...

  • *STIGLITZ: RECENT CHINA MARKET VOLATILITY ISN'T CATACLYSMIC
  • *STIGLITZ: CHINA NEEDS DEMAND BOOST TO AVOID DEEPER DOWNTURN

It's that simple eh?!

The reaction to PBOC "stability" is not good:

  • *MSCI ASIA PACIFIC EX-JAPAN INDEX DROPS 1.7%, EXTENDING LOSS
  • *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 1.7% TO 3,131.85

And Dow futures jumped 80 point and then dumped 100...

 

Chinese stocks are tumbling...

 

And ChiNext is now down over 21% YTD...

 

*  *  *

As we detailed earlier, markets were turmoiling into the China Fix...

China ripples may be turning into tsunamis. As FX markets creep open, something serious must have snapped. The South African Rand just crashed 10% - the biggest single-day drop since Lehman - to new record lows. At the same time, carry trades are being unwound en masse, smashing USDJPY down to 116.75 (strongest Yen in a year). Somebody do something!!!

 

The South African Rand crashed 10% to a record low against the USD of 17.9169. This 10% collapse is the largest on record outside of the immediate post-Lehman move...

 

Don't forget - As goes the South African Rand, so goes The World?

 

Korean Won plunges to its lowest since July 2010...

 

And Yen is surging...

 

Smashing Nikkei futures down over 500 points from Japan's close....

 

As USDJPY tumbles so US Equity markets are slumping...

 

And crude is carnaging...

 

Copper flash-crashed at the open and is now retesting...

 

It appears people were expecting some Chinese intervention over the weekend... and so far have been disappointed.

For now, Gold is bid as a safe haven...

 

Charts: Bloomberg

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two hoots's picture

"Somebody do something!"

I'm rearranging the chairs as quickly as possible.

mustamakkara's picture

Just 10%? That's barely hyperinflation.

CPL's picture

My job is so fucking unbelievable.

I'll try to sum it up by first telling you about the folks I work with:

First, there is this supermodel wanna-be chick. Yeah, okay, she is pretty hot, but damn is she completely useless. The girl is constantly fixing her hair or putting on makeup. She is extremely self-centered and has never once considered the needs or wants of anyone but herself. She is as dumb as a box of rocks, and I still find it surprising that she has enough brain power to continue to breathe.

The next chick is completely the opposite. She might even be one of the smartest people on the planet. Her career opportunities are endless, and yet she is here with us. She is a zero on a scale of 1 to 10. I'm not sure she even showers, much less shaves her "womanly" parts. I think she might be a lesbian, because every time we drive by the hardware store, she moans like a cat in heat.

But the jewel of the crowd has got to be the fucking stoner. And this guy is more than just your average pothead. In fact, he is baked before he comes to work, during work, and I'm sure after work. He probably hasn't been sober anytime in the last ten years, and he's only 22. He dresses like a beatnik throwback from the 1960's, and to make things worse, he brings his big fucking dog to work. Every fucking day I have to look at this huge Great Dane walk around half-stoned from the second-hand smoke. Hell, sometimes I even think it's trying to talk with its constant bellowing. Also, both of them are constantly hungry, requiring multiple stops to McDonalds and Burger King, every single fucking day.

Anyway, I drive these fucktards around in my van and we solve mysteries and shit.

johngaltfla's picture

"Somebody do something!"

Why don't we take Janet Yelllen off life support and allow markets to trade freely? That might help...

NoDebt's picture

Nights like this are why I rarely come out from under my bed, clutching my scissors.  Well, I come out long enough to refill my drink and right back under I go.

Gentlemen, I think we are headed for an historical event in the markets.

 

viahj's picture

sorry CPL, unfortunately that makes you the ascot wearing closet homosexual.

funny stuff though.

Automatic Choke's picture

Does anybody else longingly remember when we used to talk about fundamentals of stocks, and when a Valueline subscription was actually of use and worth the cost?

Stainless Steel Rat's picture

This is normalizing.  How long have you been watching?

Automatic Choke's picture

Hi SSR.  I had a Valueline subscription continuously from late '80s till about 5-6 years ago, then let it lapse.  Haven't really missed it, but wish I did.

(you related to Harry Harrison?)

 

two hoots's picture

Bring on those earning reports and foward guidance. 

 

 

Durrmockracy's picture

Futures dumping again.  Six trading days of straight losses?  No support for S&P until 1880.

JamesBond's picture

Market Watch wants to know what all the fuss is about...

 

Why is everyone so 
bearish about the market?

hedgeless_horseman's picture

 

 

The bounce in the Shanghai, tonight, from 3080 to 3109 was UNREAL.  Doesn't Simon Potter ever sleep?

Automatic Choke's picture

it is hard to buy nailguns on credit when the rates get so high....

Money Counterfeiter's picture

"a Valueline subscription was actually of use and worth the cost?"

 

Vasoline is all you need these days.

GOSPLAN HERO's picture

James Bond,

 

You meant Market Botch.

Beatscape's picture

Nothing better than wet, fresh chart porn on a Sunday night getting ready to deal with the fucktards on Monday.

Handful of Dust's picture

<< Chinese media is pushing rumors of rate cuts and urging people that they do not need USD >>

 

It might be easier to beleove the Chinese government re: their currency markets and the yuan if it were not for thier own gubmint officials moving Billions $$$$ out of their country the last 5-8 years into overseas RE.

 

If China's own gubmint officials don't have confidence in their own currency, then why should others?

 

... just say'n ....

jeff montanye's picture

very possibly.  however i would think many of the transactions done by chinese government officials to get their ill gotten gains to a safer place are already against multiple laws (not to mention the ill part of ill gotten gains).

for a very enlightening take on the stock market both now and generally, please see http://www.hussmanfunds.com/wmc/wmc160111.htm

OldPhart's picture

My Schwab account was put on hiatus back in 2008.  I've been waiting for the crash ever since.

bilbert's picture

Value Line??

God Damn!!  That used to be my bible!!

People who did their own DD back then, could outperform the market...........(sniff)....

Tall Tom's picture

Does anybody else longingly remember when we used to talk about fundamentals of stocks, and when a Valueline subscription was actually of use and worth the cost?

 

Uhhhhh....

 

Since when have fundamentals mattered?

 

People do not generally concern themselves about that which matters not.

jeff montanye's picture

fundamentals matter when value investors dominate.  

they don't when momentum speculators dominate.

see that hussman link upthread for an excellent explanation.

joe90's picture

Your fundamental is ALWAYS someone else's future, when you run out of them .....

U4 eee aaa's picture

Phil Collins

In the Air Tonight

It feels like one of those nights

https://www.youtube.com/watch?v=6Mt0ee9FraQ

Hitlery_4_Dictator's picture

LOL Phil Collins became an honorary Texan, when he gave the largest private collection of Texas Revolution memorabilia to the Alamo in 2014. Must be a good guy.

Tall Tom's picture

I think that Genesis, althugh a secular band, does have solid Christian roots.

 

Even Peter Gabriel's "In Your Eyes" demonstrate the underlying beliefs. (Note the name??? Gabriel?)

fockewulf190's picture

Phil Collins???  No way Jose!

SOME HEADS ARE GONNA ROLL!!

https://www.youtube.com/watch?v=e1EnufbzFb0

espirit's picture

I'll bid one can of meat for the broad.

(One Second After)

aurum4040's picture

We all realize that their will be a grand yuan/renmibi re-evaluation and it will undoubtedly become the next reserve currency sooner than later. What the Chinese are doing is appearing weak within strength as the grand game shifts. They have nothing but time and will turn these panic prices into profits. They also have the most gold in the world between their citizens and their central bank. And 90+% of the world's rare earth's...They will be fine. 

Booked's picture

 

 

"Gentlemen, I think we are headed for an historical event in the markets."

 

The most awesomest understatement since Custer said: "Over the hill, men!  I believe these Indians are friendly!"


 


mickeyman's picture

Custer never said anything like that. It was more like, "we'll trounce those Indians and be back at the fort in time for a warm lunch."

monk27's picture

Dude, you sound great for a movie !

bid the soldiers shoot's picture

So what exactly is your job?

It's a mystery we all would like to solve.

CPL's picture

Stunt Cock, quill sharpener and taco burglar.  You need any of those things done just let me know.

analyzer_66's picture

Did you say a Taco Sharpener with a stunted cock ?

CPL's picture

While I'll never touch bottom I'll certainly bang the hell out of the sides.

Montani Semper Liberi's picture

It's no fun knock the bottom, take it from me.

fockewulf190's picture

How can you deal with hearing "Zoinks!" the whole damn day?