Asia

In October, we discussed Indian Prime Minister, Narendra Modi’s, decision to hand over $32bn to recapitalise India’s state banks. The motivation was India’s slowing growth rate and the need to add one million Indians to the workforce every month. Crippled by massive bad debts, the state-owned banks were struggling to extend more credit to the economy. The announcement caused a surge in India’s Sensex equity index, led by the banks.

In the run up to the 'great recession' of 2008/2009, it was unsuspecting European and Asian buyers that supplied the marginal capital required to turn America's plain vanilla, fed-induced housing bubble into a turbo-charged, global financial time bomb by indiscriminately scooping up highly-levered structured mortgage products with absolutely no idea what was behind those products.

Now, it seems that China's lust for levered returns in U.S. structured products has returned and is focused this time around on the CLO market.  Per Bloomberg: 

A day after China’s state-run airline closed its last remaining routes to North Korea – a decision the airline’s executives blamed on a sharp decline in business travelers due to restrictive UN Security Council sanctions – Communist Party spokespeople slammed new US sanctions targeting Chinese traders doing business with North Korean businessmen, calling them “wrong” while reminding the US that China has vigorously enforced the UN sanctions.

Global shares hit another record high on Wednesday, propelled higher by what increasingly more call (ir)rational exuberance, and investors’ unflagging enthusiasm for tech stocks. That said, S&P futures are unchanged the morning before Thanksgiving (at least before the market open ramp), as are European stocks (Stoxx 600 is flat), despite the euphoria in the Asian session which saw the MSCI Asia Pac index hit a new all time high...

Following the new all-time high in US equities, the MSCI Asia Pacific Index broke through its November 2007 peak to make an all-time high in Wednesday’s trading session. This was something we noted could happen yesterday in “SocGen: Asian Equities Are So Awesome, A China Minsky Moment Is ‘Manageable”. The dollar weakened slightly after outgoing Fed Chairman, Janet Yellen, cautioned against interest rates rising too quickly in one of her last Q&As at NYU on Tuesday evening.