Hong Kong Real Residential Property Price Index Below March 2018 levels
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rssUS high yield yield to Worst- S&P Yields (black) & VIX both appear bottoming
Wall Street will be the next US-China battleground
If the U.S. blacklisted Chinese companies, billions of dollars of stocks would have to be dumped. © Reuters
Senator Marco Rubio fired the first major salvo last month by introducing legislation that would increase oversight of Chinese companies listed on American stock exchanges, delisting those that fail to comply with the new requirements. Days later, he queried U.S. index compiler MSCI about its addition of domestic Chinese stocks to its global indexes, saying it risked exposing American investors to corporate fraud.
Rubio’s bill seems poised to gain momentum. If indeed passed, it would represent a new front in the U.S. economic war with China and could have a dramatic impact on global investment flows. Such a law would weigh heavily on China-related stocks around the globe and could even have domestic political repercussions for President Xi Jinping.
Chinese companies have been tapping the U.S. capital markets since the early 1990s. A listing in New York has long been seen as confirmation that a company is indeed one of China’s best and brightest.
Yet an American listing did not necessarily assure good corporate governance. U.S. regulators have never been able to examine audit documents from Chinese companies as Beijing considers that practice a breach of its sovereignty and a risk to its state secrets.
The escalation from import tariffs to capital markets means that the U.S. and China are now engaged in the early stages of an economic war. It is only recently that the U.S. administration has recognized that America’s advantages in taking on China lie in its control over the global reserve currency and the world’s greatest capital market. The U.S. has many alternatives to China but China does not enjoy the same luxury of choice.
While many Chinese companies might seek to shift their primary listing to Hong Kong if Rubio’s bill were passed, success is not a given. Hong Kong would no doubt welcome a surge of such initial public offerings, but the world is a global marketplace and investors would still ask why the companies were unable to provide better disclosure in the U.S.
Other politicians would go further than Rubio. Some voices are demanding that Trump restrict U.S. pension funds and other such asset managers from investing in Chinese companies or at least blacklist state-owned ones.
Is the dollar overvalued?
Countries With the Highest Housing Bubble Risks
Crucial Update :Dollar Index ,Euro ,Yen ,GBP ,INR ,CAD ,AUD ,BRENT ,WTI ,GOLD ,SILVER -Anirudh Sethi
The dollar gained against most of the world’s currencies last week. With a few sessions left in July, the greenback has advanced against the major and all but a handful of emerging market currencies. It rose to new highs for the year at the end of last week against sterling. The risk of a no-deal exit has increased with the new UK’s new Prime Minister making demands that the EC is not prepared to grant.
The dollar is testing key levels against other major currencies that could signal a technical breakout. The euro made a marginal new low for the year last week, but the $1.1100 level held, perhaps helped by the defense of some options. The dollar knocked on JPY109, an important barrier whose break could confirm a bottom is in place and signal scope for additional near-term gains. The US dollar had recorded the lows for the year against the Canadian dollar on July 19 a little above CAD1.30 and before the weekend tested CAD1.32, the end of and band of resistance, which if broken could spur a move toward CAD1.3350-CAD1.3400.
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Fed is going to cut rates next week.
This would be just 7mths from Dec tightening. While this may appear to some to be noticeable pivot, it is right in line w/the historical average, Natixis says. The only question is how low will they go? Last 2 easing cycles began w/50bp cuts.
Surging household debt clouds Asia’s growth outlook
The rapid expansion of household debt in emerging Asian countries, particularly China, has become a risk to the global economy.In Thailand and Malaysia, debt has ballooned due to booms in the auto and housing markets, and the growing repayment burden has dampened consumer sentiment. In China, household debt as a percentage of nominal GDP is now over 50%. Countries such as Thailand have begun curbing their consumption in response to rising debt levels.The U.S. Federal Reserve is expected to cut interest rates at the end of this month. Emerging economies also have room for interest rate cuts, which would boost growth in the short run but could deepen the scars from indebtedness over the long term.
Somprawin Manprasert, chief economist at Bank of Ayudhya, pointed out that household debts have ballooned as a result of incentives for the purchase of cars and other items introduced by the Thai government in 2011. This is a structural factor that will weigh on future consumption, Somprawin said.Thailand’s household debt ratio is close to 70%. That is higher than in Japan and other advanced economies, which have ratios of about 58%, and well above that of the eurozone. The main reason is auto loans. To support the car industry, the Thai government introduced tax incentives to encourage purchases, which took off in 2012. As a result of the higher debt load, personal consumption has been sluggish and inflation has been weak.
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Trump counters Kudlow: “I didn’t say I’m not going to do something” on dollar
Trump comments late on Friday
Trump made news late in the day on Friday. Speaking to reporters, he walked back comments from economic adviser Larry Kudlow, who earlier in the day said the White House wouldn’t intervene in the dollar.
“I didn’t say I’m not going to do something,” he told reporters.
It was earlier reported that Peter Navarro gave him options on devaluing the dollar but Trump ruled them out. They also weighed proposals to publicly talk down the currency.
His public reaction is typical Trump, he rarely likes to show his hand, even in a matter that’s decided. Bloomberg sources said on Fr
He followed up that comment with several other notable quips and tweets:
- BBG, citing two sources, said lower rates from the Fed might do the job and help avoid intervention
- “I could do [currency intervention] in two seconds if I wanted to” he said
- “The dollar is very strong, the country’s very strong, the dollar — it’s a beautiful thing in one way, but it makes it harder to compete.”
- “The fed acted too soon, and I turned out to be right. They acted too soon and too violently.”
- “I think that China will probably say, let’s wait, it’s 14, 15 months until the election”
- “So, I don’t know if they’re going to make a deal. Maybe they will, maybe they won’t, I don’t care, because we’re taking in tens of billions of dollars worth of tariffs.”
- “When I win, like almost immediately, they’re all going to sign deals”
- He was asked if he will tariff French wine, after Macron levied a tax on Internet giants. “I might, I might,” he said.”I’ve always liked American wines better than French wines, even though I don’t drink wine. I just like the way they look, OK? But American wines are great.”
Thought For A Day
