While the rest of the world attempts to convince themselves that a Chinese stock market bubble and bust is at worst irrelevant, CapitalEconomics notes, [7] evidence that the labor market is coming off the boil arguably matters more to China’s economy. Chinese stocks futures are down 2% in today's pre-open after yesterday's whipsaw action as 'exit plans' for the stabilization were discussed (dumping stocks) and then denied (surging stocks) shows just how fragile (and quickly and entirely addicted to China's new 'measures' investors have become); but as BofAML warned earlier, selling pressure will likely remain relentless. Now that the spell is broken, we expect that many holders may want to sell to the forced buyers in the market. [8]
So not fear there will be plenty of liquidity...
- *PBOC TO MAINTAIN LIQUIDITY AT MODERATE LEVEL: FINANCIAL NEWS
- *PBOC TO INJECT 35B YUAN WITH 7-DAY REVERSE REPOS: TRADER
While the market may need more than just moderate amounts. As while yesterday's stability bounce helped,. futures are pointing lower as we open tonighht...
- *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 2.0%
- *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 1.3% TO 3,939.90
[9]
The real economy (goalseeked headline data aside) appears to be showing further cracks... (via CapitalEconomics) [7]
The equity market has received all the attention recently but evidence that the labour market is coming off the boil arguably matters more to China’s economy. There was a big fall in the ratio of job openings to job seekers in Q2 and slightly fewer new jobs were created in the first half of 2015 than a year before.
[10]
None of this is evidence of major stress and other indicators remain upbeat – for example, migrant wages are still rising at near 10% y/y. But the leadership is aware that economic changes are often only reflected in labour markets with a lag and it is already responding. Alongside broad policy easing, the government has introduced tax breaks for migrants setting up companies, cheap loans for start-ups, a reduction in employers’ social insurance contributions, and tax incentives and subsidies for some firms hiring workers.
* * *
Finally we have Goldman sounding the alarm for iron ore...
*IRON ORE SEEN DROPPING EVERY QUARTER THRU 2Q 2016, GOLDMAN SAYS
[11]
Prices seen at $49/ton in Q3 2015, $48 in Q4, $46 in Q1 2016 and $44 in Q2 2016, bank says in report.
“We expect seaborne supply to increase sequentially over the next two quarters and to gradually overwhelm the weak demand from Chinese steel mills,” bank says
While housing starts in China bounced back and infrastructure has overtaken property as largest end-market for steel, improvement during 2H 2015 may not be strong enough to support iron ore prices, Goldman says
Not great news for Australia.
