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
Over the weekend, when citing from an excerpt of the latest Wall Street Week episode, we revealed what to Kyle Bass was the "best investment for the next 3-5 years": the energy space. Bass added he was agnostic as to what subsector of energy one should invest in: whether it is infrastructure, pipelines, producers, upstream, downstream, he believes that there are places in the cap structure of each of these where once can put new capital and generate substantial returns.
Submitted by Ryan Opsal via OilPrice.com,
The South China Sea is continually paraded as a region rich in oil and gas deposits; however, no one really knows what’s there with any degree of accuracy. Furthermore, these possible deposits are shrouded in conflict that will not abate anytime soon, and will most likely worsen with an intensification of the security competition between China and the United States along with its regional allies, which is tightly related to these disputes.
It all started off relatively well: oil and US equity futures were buoyant on hopes Iran and Saudi Arabia would break out in a bloody conflict any minute boosting the net worth of shareholders of the military industrial complex, and then, out of nowhere, like a depressed China in a bull shop, the "mainland" crashed the party following a terrible manufacturing PMI report, which sent Chinese stocks sliding slowly at first, then very fast.
With China closing the morning session limit down, US equity futures are extending their losses (even though crude futures are holding some of their gains). The initial knee-jerk jump as crude rose on Saudi tensions has been entirely erased and Dow Futures are now down 300 points from New Year's Eve highs... Happy New Year.
China closed the morning session "not off the lows" with a bloodbath in ChiNext and Shenzhen...
With Offshore Yuan crashing over 440 pips - the most since the August deval...