LEHMAN 2.0? CHINA HALTS ALL BANK TRANSFERS
FOR 3 DAYS!
*Update:
China Compass is denying Forbes’ Gordon Chang’s report,
stating: The PBOC has not—repeat not—asked Citibank to stop
customers from wiring funds... Chang’s
understanding of Chinese culture evidently does not extend to the
timing of bank holidays.
It
appears that China’s credit crunch liquidity crisis ahead of this
week’s impending default of Credit Equals Gold wealth product is
intensifying, as the Chinese Central Bank has just ordered
commercial banks to halt all domestic renminbi bank transfers for 3
days, and renminbi foreign currency conversions for 9 days!
Emerging
Market Pain Continues
India fell 1.8%. Thailand dropped 2.6%. Jakarta
dropped 2.4%. Elsewhere in Asia, Hong Kong lost 2.1% and Shanghai
lost 1%.
Things are bad on the emerging market currency
front as well. The dollar is hitting new highs against the Turkish
Lira and the South African rand.
HSBC’s
Four Reasons Why Current EM Jitters May Last
While
HSBC itself may be having some
rather substantial capital outflow issues, that does not prevent
its head of EM research, Pablo Goldberg, to list four reasons why the
current series of “painful though unrelated flare-ups” in key
markets may last. To wit:
1) Reinforcement of preference for DM vs EM
While EM have cheapened vs DM, value might not be enough as long as the flow continues to favor DM
2) Potential short-term solutions leading to
longer-term problems
3) FX depreciation leading to outflows from
local markets
4) Due to decentralized nature of these shocks,
no silver bullet can restore appetite for risk
Of
course, he saved the best for last: “Unlike
the market shocks of recent years, QE or IMF bailouts unlikely to
come to rescue this time.”
Which really is all that matters in a time when the Fed has begun
tapering and any market not
economy data-driven
untapering, will merely serve to kill its credibility that much
faster.1
Finally, in order to assess EM demand, Goldberg
recommends tracking 1Y/1Y swaps, China PMIs and EPFR flows data to
see when/if the capital outflow trend will reverse.
Source:
Bloomberg
update Jan 27, 2013 5am NY Time:
The 3 culprits behind the emerging markets rout
The 3 culprits behind the emerging markets rout
update: 10PM NY TIME JAN 27, 2013:
Did the Fed sink the emerging markets?
Did the Fed sink the emerging markets?
Argentine Peso Leads Emerging-Market
Currency Rout as Lira Sinks
The Emerging Market Crisis
Emerging-Market VIX Surges Most in Two Years
on Selloff
Are emerging markets on the brink of another
crisis?
Are We On The Verge Of A Massive Emerging
Markets Currency Collapse?
This time, the Federal Reserve has created a
truly global problem. A big chunk of the trillions of dollars
that it pumped into the financial system over the past several years
has flowed into emerging markets. But now that the Fed has
decided to begin “the taper”, investors see it as a sign to pull
the “hot money” out of emerging markets as rapidly as possible.
This is causing currencies to collapse and interest rates to soar all
over the planet. Argentina, Turkey, South Africa, Ukraine,
Chile, Indonesia, Venezuela, India, Brazil, Taiwan and Malaysia
are just some of the emerging markets that have been hit hard so
far. In fact, last week emerging market currencies experienced
the biggest decline that we have seen since the financial crisis of
2008. And all of this chaos in emerging markets is seriously
spooking Wall Street as well. The Dow has fallen nearly 500
points over the last two trading sessions alone. If the Federal
Reserve opts to taper even more in the coming days, this currency
crisis could rapidly turn into a complete and total currency
collapse.
A lot of Americans have always assumed that the
U.S. dollar would be the first currency to collapse when the next
great financial crisis happens. But actually, right now just
the opposite is happening and it is causing chaos all over the
planet.
Strongman Shelford
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