David Fuller and Eoin Treacy's Comment of the Day
Category - China

    China's Yield Appeal Catapults Yuan to Global FX Big League

    This article for Bloomberg may be of interest to subscribers. Here is a section:

    There have been many false dawns in China’s quest for the yuan to challenge other major currencies. But underpinning the explosion this time lies a torrent of capital flowing into China’s markets, fueled by a frantic search for returns with over $14 trillion of debt globally paying less than 0%.

    That appetite for some of the highest-yielding government bonds in the Group-of-20 countries has elevated interest in China to fever pitch and is generating demand for liquidity from investors looking to finance and hedge their investments. It’s also spurring volatility and attracting speculators who overlooked the market for years.

    “It’s certainly a top currency in terms of the flow that we’re seeing,” said Kevin Kimmel, New York-based global head of electronic FX at Citadel Securities, one of the world’s biggest market makers. “Trading activity in the yuan has increased significantly.”

    The shift comes as China continues to relinquish control -- albeit slowly -- of its tightly-managed currency, a linchpin of Beijing’s long-term plan to encourage its greater global use. China is considering easing restrictions on citizens investing in securities outside its mainland, a move that would facilitate two-way capital flows.

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    China blocked Jack Ma's Ant IPO after investigation revealed

    This article from the Times of India may be of interest to subscribers. Here is a section:

    The main reason seemed to be “growing unease in Beijing over Ant’s complex ownership structure and the people who stood to gain most from it”. The Street Journal said in a report on Tuesday.

    “Behind layers of opaque investment vehicles that own stakes in the firm are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle” the report added.

    One of Ant’s investors is Boyu Capital, a private equity firm founded in part by Jiang Zhicheng. Jiang Zhicheng is the grandson of former Chinese leader Jiang Zemin, Many of Jiang Zemin’s allies have been purged in Xi’s anticorruption campaign, though he remains a force behind the scenes the WSF said in its report.

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    Email of the day on Chinese Banks and geopolitical risk

    Always enjoy the service, Eoin and look forward to the daily updates. To better my understanding of reading charts, would you please walk me through the consistency pattern you see in the Commercial and Industrial Bank of China's chart that make its purchase, "shooting ducks in a barrel", as a very wise man would say. Thank you.

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    Email of the day - on investable ideas

    Firstly, thanks for the terrific service, it’s been so helpful in these turbulent times.  I was interested to read the subscriber feedback in today's comment. 

    I agree with the comment that sometimes it’s quite hard to find investable ideas in some of the themes that you so accurately pick up on. 

    For example, soft commodities/agricultural products, some direction as to likely beneficiaries would be really helpful.  I’m a UK based investor, so in general like to stick to our market or Europe and it has not been easy.  Perhaps Bayer?  ABF but the Primark exposure is confusing.  In the Eoin’s Favourite’s section of the chart library some of the categories do help, but there’s doesn’t seem to be one directly related to rising soft commodity prices other than farm machinery or fertilisers?

    Lithium is another one where I am struggling to find the right investment, even though I looked at your collection of related companies.  As the price seems to have broken out of a long-term downtrend some suggestions as to likely beneficiaries would be really helpful, although understand that one must also do one’s own research.

    With Bitcoin, which I’m not that keen to buy, but you highlighted the Greyscale Bitcoin Trust which although I’ve not invested in it was really helpful to have an idea related to the concept you were right about. 

    Hope this feedback helps and thanks again.

    And

    I found the criticism yesterday, a bit harsh.  There are few sites that provide the breadth and depth that we get from FTM.  Here, in West Aust, I wake each morning to your market summary of the principal events.  I find it cost effective for that point alone.

    The suggestion above regarding missed opportunities is one worth pursuing, not so much regarding the chartbook but for highlighting early chart indications of emerging opportunities.  I feel that perhaps FTM may report facts that are available elsewhere but the site is not fully exploiting your chart analysis skills that are not available elsewhere.  You should exploit your strengths and don't reproduce stuff that is, or soon will be, in the media. We all want to know where Eoin Treacy sees emerging or imminent changes. 

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    China Asset-Bubble Warning Threatens Stock Frenzy in Hong Kong

    This article Richard Frost for Bloomberg may be of interest to subscribers. Here is a section: 

    In mainland markets, a gauge of interbank borrowing costs jumped 36 basis points to 2.78% on Tuesday, the highest level in a year. Futures on Chinese government bonds due in a decade were poised for the biggest decline since September, while the CSI 300 Index of shares in Shanghai and Shenzhen, which has been approaching 2007’s record high, fell 2%.

    “The PBOC wants to bring investors out of the euphoria caused by abundant liquidity in December,” says Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. “The PBOC is unlikely to loosen its purse strings at least this week, which will make cross-month liquidity very tight.”

    PBOC Governor Yi Gang on Monday said the central bank will seek to support economic growth while limiting risks to the financial system -- a continuation of its existing policy stance. Yi said China’s total debt-to-output ratio climbed to around 280% at the end of last year.

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    Signaling No Change in China's Course, Xi Warns Against Cold War

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    “To build small circles and start a new Cold War, to reject, threaten or intimate others, to willfully impose decoupling, supply disruptions, or sanctions, or to create isolation or estrangement, will only push the world into division and even confrontation,” he said.

    Xi’s speech had been widely anticipated for the tone it would set for relations between the world’s biggest economies over the next four years. Though Xi did not name Biden by name, many of his comments were clearly targeted at the new U.S. administration.

    Xi repeated many of the same talking points about multilateralism and “win-win” outcomes that he deployed in his last address to Davos four years ago, days before Donald Trump’s inauguration, but he also signaled that he does not intend to change course in the face of U.S. pressure.

    “Each country is unique with its own history, culture and social system, and none is superior to the other,” Xi said, warning against imposing a “hierarchy on human civilization” or forcing one’s own systems onto others.

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    Jack Ma's Brief Video Chat Prompts a $58 Billion Sigh of Relief

    This article by Lulu Yilun Chen, Coco Liu and Abhishek Vishnoi for Bloomberg may be of interest to subscribers. Here is a section:

    Much about the future of China’s most famous businessman remains unclear. Yet analysts said Wednesday’s video was a sign that worst-case scenarios -- such as jail time for Ma or a government takeover of his companies –- are probably now off the table. It’s unlikely Ma would have participated in the event without at least tacit approval from Beijing; state-run media including the Global Times were among outlets that posted snippets of his talk or wrote stories about his appearance.

    “There’s still a lot of uncertainty on regulators’ next moves, but this does mean the status of Jack Ma is much better than a lot of people speculated,” said Fang Kecheng, a professor at the Chinese University of Hong Kong.

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    Weekly Warm-up: More Stimulus May Mean Less for Markets

    Thanks to a subscriber for this report from Mike Wilson at Morgan Stanley which may be of interest. Here is a section: