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Chinese Yuan Surges & Stocks Jump To 2014Highs After PBOC Unleashes QE

Submitted by Tyler Durdenon 07/31/2014 22:27 -0400

Bond China Equity Markets Free Money Japan Yuan

0

Quietly, and without the drama associated with The Fed and ECB,

China unveiled what looks like QE recently(as we discussed

in detail here). Whether this is a stealth creation of a 'fannie-

mae' structure to support housing or merely another channel for

the PBOC to shovel out hole-filling liquidity is unclear. However,

one thing is very clear, demand for CNY is surging (even as

the PBOC weakens its fixing) and the Shanghai Composite is

surgingas hot money chases free money once again...

The Yuan hasrallied (lower on the chart)for8days straight as

PBOC weakened its Fix.

The Chinese stock market has quietly surged to its highest since

December - outperforming the Dow now year-to-date...

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Thu, 07/31/2014 -

BofA believes 3 factors are at play here:

Charts: Bloomberg

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3/5



22:33 | 5030979

Thu,

07/31/2014 -

23:10 |

5031092

Thu,

07/31/2014 -

23:11 |

5031094

Thu, 07/31/2014 -

22:36 | 5030990

Thu,

07/31/2014 -

22:39 |

5031001

None of that.

I can explain you what it is

Same as Federal Reserve QE, monetizing losing derivatives

positions.

In China's case, they are monetazing pyramid schemes

involved in China's shadow banking where Wealth Management

Products promise 25%-50% annual interest rates for loans.

So, the country has run out of suckers, money is already

converted to USD, Toronto or London real estate and has

moved out of China via HSBC.

Politburo is simply monetizing their own pyramid schemes by

creating CNY by buying these schemes.

They are letting thousands of them collapse, but they are

bailing out their own banks involved with pyramid schemes.

It is that simple.

Al Huxley

Whew! well,

as long as

they're doing

stuff that has no

negative side effec ts, we can all just be thankful that

they're modernizing their financial system and bringing it to

global standards...

Greenskeeper_Carl

if this is true,

its the best

and simpleexplanation i have

heard. The shadow banking pyramid schemes does sound

familiar though. As does monetizing losing derivatives

positions. These people are leveraged so far, a small move

in the wrong direction wipes out all their capital pretty

quick. If all of this wealth escaping is coming to an end,

should be interesting to see what happens to these real

estate markets with no more chinese buyers paying cash

for them without ever laying eyes on the property. Also,

no ammount of money printing is going to unwind the

rehypothicated commodity scandals going on. You either

have the commodity or you don't. people who actually

make things need the cooper, aluminum, etc, not freshly

printed money.

Cognitive Dissonance

It was China's

turn in the global rotation. Draghi is warming up in the

bullpen.

ekm1

By the same

logic.

Countries need not

real eonomy.

They can simply mark up numbers on computers at

1:10000 leverage

Rotating QEs between countries simply kills the real

economic output, which is actually occurring

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4/5



Thu,

07/31/2014 -

23:50 |

5031203

Thu, 07/31/2014 -

22:38 | 5030994

Thu, 07/31/2014 -

22:39 | 5031000

Thu, 07/31/2014 -

22:43 | 5031013

Thu,

07/31/2014 -

22:55 |

5031049

Thu, 07/31/2014 -

22:44 | 5031021

Thu, 07/31/2014 -

22:49 | 5031022

Thu, 07/31/2014 -

23:02 | 5031069

HardlyZero

BRICs in time

to bail-out

Argentina...then

Portugal ?

Fiat follies...bread and circus.

Fresh fiat.

Yen Cross

China needs to

coupon that $usd QE-loan guarantee thingy? One $

trillion of slush to clean up the rehypothecation of

real-estate and commodities debacle!

GrinandBearit

This

should elevate the US markets tonight/tomorrow.

Never One Roach

The "Smart Money"

moves out ASAP in RE overseas in suitcases, wires,

middle men, etc. First they send the kids over [to

Vancouver, SF, LA, Sugar Land...where ever] then comes the

Loot, then comes the Main Man and shuts the door behind

him.

China ain't the only one. The title closing lady down the block

says 10-20% of her closing are with very young Nigerian [and

other African] college students who are sent here by their

very wealthy [usually politician fathers back home] who

receive the millions in wire transfers "for school Thingamajigs"

while the kids then buy two three houses with the Loot.

No questions asked. USA has to be near the top for Loot

Laundering from those countries.

Wild Theories

Correction:

USA IS the

top loot laundering

destination in the world.

The only reason Russians go to UK or Cyprus was because

the US have always been more or less anti-Russian, if the

anti-Russian sentiment didn't exist in the US, even the

Russians would come to US first.

tickhound

Um ok. Or the

yuan is surging because of the announcement 8-14

days ago of BRIC banking bypassing western lending

institutions and the dollar.

But whatever Occam's razor isn't always best.

hobopants

Lol, I'm sure this

will end well. God help us if we ever do get growth,

velocity is going to turn all that liquidity into one hell

of a tsunami.

Atomizer

The inflow of

illegal wet backs equate to a new subprime housing

bubble, ObamaCare riders & taxpayer revenues.

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5/5



Thu, 07/31/2014 -

23:49 | 5031188

Fri, 08/01/2014 -

00:06 | 5031240

Fri, 08/01/2014 -

01:11 | 5031369

Watch the blowback erupt.

Wild Theories

The BofA point 3

about the carry-t rade:

I'm not sure at this point if the hot money flow is simply

domestic Chinese hot money looking for a new place to park or

outside hot money yet, it may simply be domestic Chinese

money pulling out of the real estate and going back to thelong-moribund stockmarket and the traditional 'wait for CNY to

rise" game, due more to a lack of other outlets and options

than any geniue belief in investment opportunity.

Of course, the 'wait for CNY to rise' game was originally being

played largely by Japanese money, and the news out of Japan

is increasingly gloomy, again, so maybe there's Japanese

money 'diversifying' out of Japan in there.

I guess the picture may be clearer in a few more weeks, if this

trend continues or picks up speed, if any of that is capital

flow is from the outside, or more importantly, from the west,

or if it's just domestic(or maybe regional - Japan) capital

sloshing around trying to find new places to park.

If outside hot money is indeed flowing back to China, not as a

credit tap for the Chinese but as investment chasers from the

west, as BofA is suggesting... well, guess that means we'vegot bigger problems in the west.

starman

Crist what have

we become?!

Luckhasit

Isn't this the point

were my white ZH homies cue up some Johnny Cash?

Cuz this shit is over.

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