Hong Kong

The long awaited day is finally here by which we, of course, mean the day when nobody has any idea what the Fed will do, the Fed included. Putting today in perspective, there have been just about 700 rate cuts globally in the 3,367 days since the last Fed rate hike on June 29, 2006, while central banks have bought $15 trillion in assets, and vast portions of the world are now in negative interest rate territory.

• Wall Street Has Doubts About Fed Lifting Interest Rates (WSJ)
• Global stocks at three-week highs as Fed decision looms (Reuters)
• Charting the Markets: The World Awaits the Fed (BBG)
• Powerful quake off Chile slams waves into coastal towns; eight killed (Reuters)
• As Fed Storm Brews, Europe Stocks Seen Weathering Turmoil Best (BBG)
• Fiorina's rise adds another insurgent to U.S. election fray (Reuters)

Just like 13F clones end up getting burned more often than not, so too unfortunately for the Chinese copycats, an endorsement from the equity market’s savior has done nothing to ensure outsized returns. In fact, as Bloomberg adds, it was just the opposite - the stock picks have trailed the broader market. The 46 companies that reported the agency as a top 10 shareholder in the past two months lost an average 29 percent since the announcement, versus a 21 percent drop for the Shanghai Composite Index.

• Contrarian CEOs tell the Fed: Go ahead, raise my rates (Reuters)
• Goldman Warns Markets Unprepared for Fed as Treasuries Seesaw (BBG)
• Investors Look Beyond Fed Meeting, See Low Rates (WSJ)
• Volatility seen lingering no matter what the Fed does (Reuters)
• What Rising Interest Rates Would Mean for You (BBG)
• China Stocks Jump in Last Hour of Trading on State Support Signs (BBG)
• No Escape for China Hedge Funds Overwhelmed by Stocks Crash (BBG)
• Hedge Fund Bridgewater Defends Its ‘Risk-Parity’ Strategy (WSJ)

Imagine for a moment the sentiment shock for mainstream Americans if Goldman Sachs' Lloyd Blankfein was probed for insider-trading and publicly scapegoated for causing a nation's equity market (and economy) to collapse. While it may be true, it would never happen in America... But in China, as part of what authorities call "purifying the markets," the president of China’s biggest brokerage has been swept up in a widening campaign to root out financial wrongdoing and assign blame for the nation’s $5 trillion stock rout. As Bloomberg notes, shares are falling further in today's markets as the probe of Citic Securities President Cheng Boming comes after the state-run Xinhua News Agency reported last month that four executives at Citic had admitted to so-called insider trading.

Chinese equity markets are holding modest 'bounce' gains after two days of carnage. After 3 days of stronger fixes PBOC devalued the Yuan but the Ministry of Finance made it clear that "devaluation is not aimed at boosting exports," which makes us wonder, is it aimed at selling Treasuries? No additional direct liquidity injections but anxiety grows as China National Erzhong Group Co. may miss an interest payment later this month after one of its creditors filed a restructuring request, putting it at risk of becoming the second state-owned company to default in the nation’s onshore bond market.

It appears someone is betting on Kuroda and his cronies to do something later this evening (just like they did as The Fed stopped QE3 back in October) in some wierd monetray policy quid pro quo of - dump Yen all you like as long as the carry trade is alive and well. USDJPY is up from 119.85 to 120.50 (and NKY up over 400 points from US session lows), as perhaps the fact that The BoJ's ETF-buying kitty is running dry at a crucial time. Chinese equity markets are extending yesterday's losses as margin debt declines to a 9 month low (still +62% YoY), injects another CNY50bn and strengthens the Yuan fix for the 3rd day in a row; but in a somewhat embarrassing move, Washington has decided not to impose sanctions on China ahead of Xi's first state visit next week.

Major depressions do not occur overnight. They go in downward waves, interrupted at intervals by false recovery waves.  But the collapse will continue, unstoppably. Like any house of cards, once it begins to actually fall, no further Band-Aids will stop the inevitable. So, what might that trigger be?

- Bail-ins, withdrawal limits and negative interest rates may be imposed - FT proposes a ban on “barbarous relic” cash - Central banks and banks would have citizen's wealth and people themselves “completely under their control” ...

China's global meltdown-inducing "adjustment" continues unabated as fixed asset investment is weakest since 2000.

Behind the veneer of “all is well” being promoted by both world Governments and the Mainstream Media, the political and financial elite have begun implementing moves to prepare for the next Crisis.

Fostering dependence on irresponsible banks and a still very vulnerable banking sector will make the entire western financial and economic system even more vulnerable.

Despite the biggest intervention surge in offshore Yuan on record ("predatoring" any excess speculative fervor on PBOC actions in the spot market), a 'PBOC Advisor' noted that "long-term FX intervention was not their target." The Hong Kong Dollar is pressuring the strong-end of its range against the USD, trapped between the USD peg and weak economy (like so many others). Chinese stocks continue to tread water as China's Premier Li rules out QE (perhaps because pork prices are already at record high prices and are rising at a record pace), exclaiming that there "well be no hard landing," but BofAML expected 50-100bps more RRR cuts this year. PBOC strengthened the Yuan Fix tonight (just modestly).

Apparently fed up with the persistent spread between the onshore and offshore yuan, China has decided to add one more spinning plate to its collection by intervening in the offshore spot market.

• Compare: S&P 500 Futures Advance After U.S. Stocks Ignored Global Rally (BBG)
• And contrast: Global Stock Rally Grinds to a Halt (BBG)
• And be very confused: Global Stocks Lower on U.S. Interest Rate Uncertainty (WSJ)
• Hilsenrath: Fed Wavers on September Rate Rise (WSJ)
• Time for more QE: Abe Adviser Says Next Month Good Opportunity for BOJ Easing (BBG)
• Brazil downgraded to junk rating by S&P, deepening woes (Reuters)
• Kiwi dollar tumbles after New Zealand cuts interest rates (Reuters)