Some sobering words about China's imminent crisis, not from your friendly neighborhood doom and gloom village drunk, but from BofA's China strategist David Cui.
Excerpted from "2016 Year-Ahead: what may trigger financial instability", a must-read report for anyone interested in learning how China's epic stock market experiment ends.
A case for financial instability
Submitted by Michael Lebowitz via 720Global.com,
“It’s self-defeating to use the wrong monetary policy.” -Ben Bernanke
Late last month in “This Is Canada's Depression: Surging Crime, Soaring Suicides, Overwhelmed Food Banks ‘And The Worst Is Yet To Come,’” we took a sweeping look at what is truly pitiable situation in Alberta, the heart of the Canadian oil patch.
Roughly a third of provincial revenue is derived from “resources” which means that when oil prices collapsed, the territory plunged into recession. Oil and gas investment fell by more than a third in in 2015 and in its latest fiscal update, the government said it fully expects the weakness to carry into 2016.
Despite the biggest liquidity injection (CNY130bn) in 4 months, it appears Kyle Bass' top trade remains well on target as Offshore Yuan plunges, underperforming Onshore Yuan despite the largest Fix devaluation in two months. In a word - it's chaos in Chinese markets. The Shanghai Composite looks to be opening down 3% - extending yesterday's losses (beyond the US session's ADR's move). What a mess.
First: PBOC devalues the Yuan fix by the most in 2 months...
Monday proved to be the worst-ever start to a year for China as stock markets plunged, triggering a trading halt in more than $7 trillion worth of equities, futures and options. Trading was halted at 1:34 p.m. local time after the CSI 300 index dropped to 7 percent. Bloomberg.com reports: An earlier 15-minute suspension at the 5 percent level failed to stop the retreat, with shares extending losses as soon as the market re-opened. Traders said the halts took effect as anticipated without any major technical problems.