Hong Kong Dollar De-Pegging Risk Spikes As Yuan Slides, China Stocks Drop To 2-Year Lows

Update:

• SHANGHAI COMPOSITE INDEX FALLS 20% BELOW DECEMBER HIGH

To 2-Year Lows...

Offshore Yuan is being dumped again...

And The Hong Kong Dollar is under sever pressure within its peg band...

As De-Pegging risk expectations ramp up...

As we detailked earlier,following last night's notable weakness in Chinese stocks (now down 15-25% year-to-date) and today's plunge in US markets, Offshore Yuan has begun to tumble lower once again ahead of today's Yuan fix. Having slapped short Yuan speculators with a dire liquidity withdrawal, it appears traders are seeing through the "over-invoicing" bullshit of last night's trade data and outflows appear to have restarted. Equities across AsiaPac are tumbling despite PBOC injecting a massive CNY160bn of liquidity (and modestly strengthening the Yuan fix), as safe-haven flows push 10Y China bonds to 2.70% - a record low.

Chinese bonds just hit a record low yield...

• *CHINA 10-YEAR BOND YIELD DROPS 3 BPS TO RECORD 2.70%

Offshore Yuan is selling off again...

And Chinese equities are a bloodbath in 2016...

And tonight's open is not helping...

• *MSCI ASIA PACIFIC INDEX EXTENDS LOSS TO 2.3%
• *FTSE CHINA A50 JANUARY FUTURES FALL 1.7% IN SINGAPORE
• *SHANGHAI COMPOSITE FALLS BELOW AUGUST CLOSING LOW

But China "flu" appears to be spreading as carry trade unwinds spread to JPY...

Japanese stocks are plunging - NKY down 700 points from its US session highs...

To its weakest since Oct 2014...

Get back to work Mr. Kuroda!!!

Charts: Bloomberg

Comments

[Ms No]

It's interesting how the MSM rhetoric has changed to "Oh yeah, everything is fucked, it's going to correct bigtime."  You even have Federal Reserve guys coming out and scaring people.  The timing of that is interesting and it does no good whatsoever this late in the game. 

Usually they would be fighting a decline more with propaganda.  I think if it was the big one they would be.  Then you look at the Baltic Dry and it's like OOOOH SHIT!  I wonder how reliable that is anymore.  In 08 it was off kilter some from the over purchase/over building.  It seems that one would me much harder to fudge.  But then again a bunch of goat farmers have supposedly taken over half the planet with amazing guile and efficiency and people believe that's legit... so anything is possible.

[blue51]

MsNo. Your last sentence is not only very funny, it is sadly true.

[JoeySandwiches]

At this point I don't think they're gonna do negative rates or QE4. They've already sheared the sheep so much that they're drawing blood. Another QE or pushing rates negative and they'd possibly be thrust into the political spotlight and with guys like Trump(and Sanders) attacking the fed, that light might get very hot.

Much easier for the elite to follow the path of least resistance and short the shit out of the market to collapse and hide away on their private islands with all the assets they've bought with the raping profits.

[herkomilchen]

Do you think they care if they are drawing blood?  As long as they can get more, they will.   Negative rates and QE4 will extract more, a lot more, and put it straight into their pockets.

They have constructed over the past century a massive cultural and state school propaganda infrastructure successfully embedding the faith in the superiority of government decisions and solutions with unquestioning obedience to the authority of government.  While ensuring government does their bidding on a fee for service basis.  With the help of armies of intellectuals, they have built up elaborate stories around how their schemes are in "the public interest" and "for the common good of the people as a whole."  It will take a lot more than a vocal Trump or Sanders to budge people's fundamental beliefs in all that.

Like any amoral person would, they actually enjoy the shearing operation, which they consider to be their work.  They are convinced they are smarter, better, faster than everyone else and would insist they earn their wealth.  They see all their legal privileges provided by the government backed by its guns and jails as just another means to an end.  They are gangsters, they own this town.  They don't want to scurry away to hide confined to a small island.

They want to jet set on private planes between San Tropez, Davos, New York, and London, attending gallery openings, Hollywood premiers, mansion christenings, ski chalet weekends, and black tie charity balls.  To do this they must stay a part of and atop society at large and stay well-funded in escalating amounts.  For them, it's continue the shearing operation, full speed ahead.

[khnum]

Boy did Bank of Japan spend some money today

[hedgiex]

Get it that HK is a Special Administrative Region (Municipality of China with some discretions). It is not a Sovereign Nation now of single digit importance to China's GDP. Yes an important financial center well aligned to the needs of the motherland (China). De-pegging if it sends the wrong signals in undermining the Yuan will not be allowed. The analogy is that the NY Fed is not the US Fed. HK live and breathe on the flows from China (outside its financial sector) and de-pegging is of no value to a non independent economy. An amazing Spin.