China’s bank chief warns of a ‘sharp correction’

Ambrose Evans-Pritchard reports on a statement by Zhou Xiaochuan, the governor of the People’s Bank (PBOC):

Mr Zhou told China Daily that asset speculation and property bubbles could pose a “systemic financial risk”, made worse by the plethora of wealth management products, trusts, and off-books lending.

He warned that corporate debt had reached disturbingly high levels and that local governments were using tricks to evade credit curbs.”If there is too much pro-cyclical stimulus in an economy, fluctuations will be hugely amplified. Too much exuberance when things are going well causes tensions to build up. That could lead to a sharp correction, and eventually lead to a so-called Minsky Moment. That’s what we must really guard against,” he said.

The function of the central bank is to remove the punch bowl just as the party really gets going (William McChesney Martin jr., Fed chair 1951 – 1970). It looks like the PBOC may have left it too late:

Non-financial debt has galloped up to 300 per cent of gross domestic product – uncharted territory for a big developing economy.

The International Monetary Fund says debts in the shadow banking system grew by 27 per cent last year.

Less widely known is that the “augmented” budget deficit – including local government spending and the deficits of quasi-state entities – has jumped to 13 per cent of GDP. This is an astonishing level of fiscal stimulus at this stage of the economic cycle. It was around 6 per cent in 2010….

What this means is that public and quasi-public debt in China is growing at the rate of 13% of GDP. China has achieved its growth targets but at what cost to economic stability? There are no free lunches, especially from the “perpetual leveraging doomsday debt machine”.

Source: China’s bank chief warns of a ‘sharp correction’

East to West: Seoul and Footsie find support

A Twiggs Money Flow trough high above zero reflects strong buying support on the Seoul Composite Index. Breach of support at 2300 is unlikely but would signal a primary down-trend.

Seoul Composite Index

Japan’s Nikkei 225 Index broke resistance at 20200, signaling another advance.

Nikkei 225 Index

Hong Kong’s Hang Seng Index has been in a strong bull market since breaking resistance at 24000 early this year.

Hang Seng Index

India’s NSE Nifty Index displays strong buying pressure, with Twiggs Money Flow oscillating above the zero line. Breakout above resistance at 10000/10100 is likely and would signal another advance.

Nifty Index

Target 10000 + ( 10000 – 9000 ) = 11000

Moving to Europe, Dow Jones Euro Stoxx 50 is headed for a test of resistance at 3650. A big Twiggs Money Flow trough above zero signals buying pressure. Breakout is likely and would offer a target of 3900*.

DJ Euro Stoxx 50

* Target calculation: 3650 + ( 3650 – 3400 ) = 3900

The UK’s Footsie is rallying strongly after a bear trap at 7300. Often the strongest bull signals start with a bear trap or false break through support. breakout above 7550 would offer a target of 7900*.

FTSE 100

* Target calculation: 7550 + ( 7550 – 7200 ) = 7900

Canada’s TSX 60 continues to consolidate below its former primary support level at 900. Beset by a massive property bubble, with soaring household debt, and weak crude oil prices the index displays a similar pattern to the ASX 200. Declining Twiggs Money Flow warns of selling pressure. Breach of support at 880 would confirm the primary down-trend.

TSX 60

The Chinese like free trade when it helps them achieve hegemony

From Henrique Shneider:

China has a long history of “state consequentialism.” According to this philosophy, all actions that make the state stronger are morally good. It even makes it the moral task of the state and its servants to take actions that make it stronger. While such thinking is not particular to China, the most ancient form of state consequentialism is Mohism, a philosophical movement that emerged there around the fifth century BC.

Two hundred years later, Chinese Legalism pushed state consequentialism to the next level. Han Fei, its chief proponent, was opposed to domestic markets with the free exchange of goods. His ideal was a central planner that determined input and output and prices. However, he loved the idea of export – if controlled by the state. In chapter 46 of his Han Feizi text, he wrote: “If people attend to public duties and sell their produce to foreigners, then the state will become rich. If the state is rich, then the army will become strong. In consequence, hegemony will be attained.”

Hegemony is usually the political goal of state consequentialism. With such a rich tradition in this philosophy, it may be that Xi Jinping’s China is only embracing free trade to become a new hegemon.

There are three reasons to believe this hypothesis. First, state consequentialist thinking is very much alive in China (and elsewhere). Second, Mao Zedong, the founder of the People’s Republic, was a great admirer of Han Fei. Third, the Legalists’ texts are widely read in the Communist Party’s cadre schools.

My grandfather was fond of saying “If you buy cheap, you pay dear.” The real price of cheap imports from non-democratic countries like Russia, China, North Korea or Iran is that you are funding their military expansion. Democracies, with the arguable exception of the US, tend to have other priorities.

Source: The Chinese like free trade when it helps them achieve hegemony

East to West: Seoul selling pressure

Declining peaks on Twiggs Trend Index and a tall shadow on this week’s candle warn of selling pressure on the Seoul Composite Index. Breach of support at 2300 would signal a primary down-trend.

Seoul Composite Index

Most other exchanges remain bullish, with Japan’s Nikkei 225 Index breaking resistance at 20200. Expect retracement to test the new support level. Respect would signal a fresh advance.

Nikkei 225 Index

China’s Shanghai Composite Index is retracing to test its new support level at 3300. Declining peaks on the Trend Index warn of medium-term selling pressure. Respect of support would confirm a primary advance.

Shanghai Composite Index

India’s NSE Nifty Index respected resistance at 10000/10100 and declining peaks on Twiggs Trend Index warn of medium-term selling pressure. Follow-through below the rising trendline would warn of a correction.

Nifty Index

Target 10000 + ( 10000 – 9000 ) = 11000

Moving to Europe, Germany’s DAX consolidated ahead of the elections. The Trend Index trough at zero indicates buying pressure and a test of 13000 is likely.

DJ Euro Stoxx 600

The UK’s Footsie retraced to test its new resistance level at 7300. Respect would confirm a primary down-trend. Declining Twiggs Trend Index peaks, especially below zero, signal selling pressure. Follow-through below 7100 would strengthen the bear signal.

FTSE 100

Canada’s TSX 60 continues to consolidate below its former primary support level at 900. Declining Trend Index warns of selling pressure. Breach of medium-term support at 880 would confirm the primary down-trend.

TSX 60

East to West

First, the canary in the coal mine, the Seoul Composite Index, found support at 2300. Follow-through above 2400 would be a bullish sign, suggesting a fresh advance.

Seoul Composite Index

Japan’s Nikkei 225 Index found support despite ICBMs flying overhead, rallying to test resistance at 20000. Recovery above 20000 is likely and would signal a fresh advance.

Nikkei 225 Index

China’s Shanghai Composite Index is retracing to test its new support level at 3300. Respect is likely and would confirm a fresh advance.

Shanghai Composite Index

India’s NSE Nifty Index is testing resistance at 10000/10100. Twiggs Trend Index oscillating above zero signals long-term buying pressure. Breakout is likely and would indicate a fresh advance with a long-term target of 11000*.

Nifty Index

Target 10000 + ( 10000 – 9000 ) = 11000

Moving to Europe, Germany’s DAX rallied off support at 12000, suggesting a fresh advance. Recovery of the Trend Index above zero is bullish. Breakout above 13000 would signal another primary advance.

DJ Euro Stoxx 600

The UK’s Footsie, however, broke support at 7300 on the back of BREXIT worries, warning of a primary down-trend. Twiggs Trend Index peaks below zero signal selling pressure. Follow-through below 7100 would confirm a bear market.

FTSE 100

In Canada, the TSX 60 continues to consolidate below its former primary support level at 900. A declining Trend Index warns of selling pressure. Breach of medium-term support at 880 would confirm a primary down-trend.

TSX 60

Asian stocks rally, Europe follows

Asian stocks have started to rally and Europe is likely to follow. Canada faces stronger headwinds and is expected to struggle to break resistance at 900.

Starting near Korean epicenter of political tensions, the Seoul Composite Index remains bullish. Though breach of the rising trendline could change matters in an instant. No hint of panic selling….yet.

Seoul Composite Index

China’s Shanghai Composite Index finally broke through resistance at 3300, offering a target of 3500. The Trend Index oscillating above zero indicates long-term buying pressure.

Shanghai Composite Index

Japan’s Nikkei 225 Index encountered strong resistance at 20000 but a rounding top is a bullish sign. Recovery above 20000 is likely and would signal a fresh advance.

Nikkei 225 Index

India’s NSE Nifty Index is testing resistance at 10000. Twiggs Trend Index oscillating above zero signals long-term buying pressure. Breakout is likely and would indicate a fresh advance with a long-term target of 11000*.

Nifty Index

Target 10000 + ( 10000 – 9000 ) = 11000

In Europe, the UK’s Footsie, beset with BREXIT issues, still managed to respect support at 7300, avoiding a primary down-trend. Another test of 7600 is likely but breakout and another primary advance appear remote given the loss of momentum and selling pressure signaled by the declining Trend Index.

FTSE 100

Dow Jones Euro Stoxx 600 found support at the rising trendline, around 370. Recovery of the Trend Index above zero is likely. Follow-through above 380 would suggest another primary advance.

DJ Euro Stoxx 600

Moving to North America, Canada’s TSX 60 continues to consolidate in a narrow line below the former primary support level at 900. Declining Trend Index warns of long-term selling pressure. Breach of support at 880 is likely and would confirm a primary down-trend.

TSX 60

Federal Reserve Bank of San Francisco | Forecasting China’s Role in World Oil Demand

From Deepa D. Datta and Robert J. Vigfusson

Although China’s growth has slowed recently, the country’s demand for oil could be entering a period of faster growth that could result in substantially higher oil prices. Because Americans buy and sell oil and petroleum products in the global market, global demand prospects influence the profitability of U.S. oil producers and the costs paid by U.S. consumers. Analysis based on the global relationship between economic development and oil demand illustrates the prospects for Chinese oil demand growth and the resulting opportunities and challenges for U.S. producers and consumers.

The oil market has seen two major surprises in the 21st century. The most recent was the shale revolution, which dramatically increased the amount of oil supplied by North American producers and contributed to the oil price collapse of 2014.

Before the shale revolution, however, there was rapid demand growth from emerging market economies. Propelled by robust GDP growth, China’s demand for oil nearly doubled within a decade, and other emerging markets experienced similar growth. As a consequence, oil prices soared in 2007 and 2008, and advanced economies, including the United States, cut their consumption.

Most studies assume that shifts in global demand over the next decade will be gradual, with oil prices continuing to be driven primarily by supply. The surprising resilience of U.S. shale oil production both to lower oil prices and to coordinated actions by OPEC countries suggests that any oil price recovery will remain subdued (Energy Information Administration 2016). However, one potentially important source of future rapid growth in demand and thus in prices comes from emerging market economies, especially China. Given that Chinese demand helped boost world oil prices in the early 2000s, we consider the implications of a similar surprise in the coming years.

China’s future demand for oil will depend on both its economic growth and its energy choices. A high level of growth combined with energy-intensive choices could result in Chinese oil demand doubling by 2025. Even in a scenario with more moderate growth and less energy-intensive choices, China’s oil demand would still grow by over 30% by 2025. To the extent that U.S. and foreign oil producers do not anticipate this demand increase, prices would have to rise, perhaps dramatically.

Source: Federal Reserve Bank of San Francisco | Forecasting China’s Role in World Oil Demand

Global correction

Global stock markets have mostly experienced selling pressure over the last two weeks but most of the activity is secondary in nature and, apart from longer-term issues in the UK and Canada, is unlikely to affect the primary up-trend.

Starting near the North Korean epicenter of the latest tensions, the Seoul Composite Index is largely unfazed. The monthly chart reflects a secondary correction with moderate selling pressure and no hint of panic selling.

Seoul Composite Index

China’s Shanghai Composite Index rallied after a modest correction.

Shanghai Composite Index

While bearish divergence on Hong Kong’s Hang Seng Index warns of selling pressure and a secondary correction to test 26000.

Hang Seng Index

India’s Sensex is undergoing a correction after breaking its rising trendline but found support at 31000.

BSE Sensex

Moving farther afield, Canada’s TSX 60 continues to consolidate in a narrow line below the former primary support level at 900. Declining Twiggs Money Flow warns of long-term selling pressure. Breach of support at 880 is likely and would confirm a primary down-trend.

TSX 60

Europe also experienced selling pressure, with the Footsie testing primary support at 7300. Breach of support would signal a primary down-trend.

FTSE 100

Germany’s Dax found support at 12000. Respect, with a Twiggs Money Flow trough above zero, would indicate another primary advance.

DJ Euro Stoxx 50

Selling pressure surges around the globe

Canada’s TSX 60 fell sharply this week. Twiggs Trend Index below zero warns of long-term selling pressure. Breach of support at 880 would confirm a primary down-trend.

TSX 60

In the UK, the Footsie is testing primary support at 7300. Twiggs Trend Index below zero again warns of long-term selling pressure. Breach of support would signal a primary down-trend.

FTSE 100

Dow Jones Euro Stoxx 50 is testing long-term support at 3400. Twiggs Trend Index, again below zero, warns of long-term selling pressure

DJ Euro Stoxx 50

India’s Sensex is undergoing a correction after breaking its rising trendline and support at 31500. Expect strong support at 29000.

BSE Sensex

China’s Shanghai Composite Index is also testing support. Breach of 3200 would warn of another test of primary support at 3000.

Shanghai Composite Index

China holds its head above water

A quick snapshot from the latest RBA chart pack.

Manufacturing is holding its head above water (50 on the PMI chart) and industrial production shows a small upturn but investment growth is falling, as in many global economies including the US and Australia. Retail sales growth has declined but remains healthy at 10% a year.

China

Electricity generation continues to climb but steel, cement and plate glass production all warn that real estate and infrastructure development are slowing.

China

Interest rates remain accommodative.

China

Real estate price growth is slowing but remains an unhealthy 10% a year. Real estate development investment rallied in response to lower interest rates but is clearly in a long-term decline.

China

There are no signs of an economy in immediate trouble but there are indications that the real estate and infrastructure boom may be ending. Through a combination of fiscal stimulus and accommodative monetary policy the Chinese have managed to stave off a capitalism-style correction. But failure to clear some of the excesses of the past decade will mean that the inevitable correction, when it does come, is likely to display familiar Asian severity (Japan 1992, Asian Crisis 1997).

Around the markets: Hong Kong & India bullish

Canada’s TSX 60 continues to test resistance at the former primary support level of 900. Bearish divergence on Twiggs Money Flow warns of strong selling pressure. Decline below 880 would confirm a primary down-trend, with an initial target of 865*.

TSX 60 Index

* Target calculation: 900 – ( 935 – 900 ) = 865

The Footsie recovered above 7400 but bearish divergence on Twiggs Money Flow warns of long-term selling pressure. Another test of primary support at 7100 remains likely.

FTSE 100 Index

European stocks are taking a beating, with the Dow Jones Euro Stoxx 50 Index testing support at 3400. Sharp decline on Twiggs Money Flow warns of selling pressure. Breach of 3400 would warn of a test of 3200.

DJ Euro Stoxx 50 Index

* Target calculation: 3650 – ( 3650 – 3450 ) = 3850

India’s Sensex remains in a bull market.

BSE Sensex

* Target calculation: 29000 + ( 29000 – 26000 ) = 32000

As does Hong Kong’s Hang Seng Index.

Hang Seng Index

* Target calculation: 24000 – ( 24000 – 21500 ) = 26500

While China’s Shanghai Composite index ranges between 3000 and 3300. Government interference remains a concern.

Shanghai Composite Index

Round the world: India & Hong Kong advance, Canada falters

Canada’s TSX 60 retraced to test resistance at the former primary support level of 900. Respect is likely and would signal a bear market. Decline of Twiggs Money Flow/Trend Index below zero would strengthen the bear signal. Medium-term target for the decline is 865*.

TSX 60 Index

* Target calculation: 900 – ( 935 – 900 ) = 865

The Footsie is losing momentum, with penetration of successive trendlines and declining Twiggs Trend Index. A test of primary support at 7100 is likely.

FTSE 100 Index

Dow Jones Euro Stoxx 50 Index, representing the 50 largest stocks in the Euro Zone, found support above 3400. Penetration of the declining trendline would indicate the correction is over and suggest the start of another advance — confirmed if the index breaks its recent (May 2017) high.

DJ Euro Stoxx 50 Index

* Target calculation: 3650 – ( 3650 – 3450 ) = 3850

It’s full steam ahead for India’s Sensex. Trend Index troughs above zero indicate strong buying pressure. Expect some profit-taking at the target of 32000* but any correction is likely to be shallow as the bull market gathers momentum.

BSE Sensex

* Target calculation: 29000 + ( 29000 – 26000 ) = 32000

Hong Kong’s Hang Seng Index has also reached its target of 26500. Again Trend Index troughs above zero indicate solid buying pressure.

Hang Seng Index

* Target calculation: 24000 – ( 24000 – 21500 ) = 26500

China’s Shanghai Composite index is also rallying but I remain wary of government intervention.

Shanghai Composite Index

Credit Suisse contrary view on Iron Ore

Where is the Chinese iron ore inventory cycle?

By Houses and Holes at 9:06 am on July 5, 2017
Republished with thanks to Macrobusiness.

From Credit Suisse:

Iron ore turns up, once again confounds bears on the Street

Iron ore once again confounded those calling it down by jumping at the end of June. However, this was predictable. In late May and early June we were hearing anecdotally (Platts) that some steel mills were on-selling contractual cargoes of iron ore to repay quarterly loans due at the end of June. That was a destocking event which inevitably put pressure on the price by adding cargoes to the daily sales list. But by the end of the month, loans were met and destocking is always followed by restocking.

Street still focused on port stocks, China mills are not Iron ore has been nothing if not volatile so it has been a tough call, but the Street keeps getting it directionally wrong, doubling down when the price is sliding. We believe one big difference between the Street’s price forecasts and what actually happens is that analysts are looking at a different side of the supply-demand equation from the actual buyers – Chinese steel mills. The street is obsessed with ever-rising port stocks. These stocks seem a clear indication that iron ore is over-supplied so for commodity analysts, that means the price should fall until some supply is destroyed to restore balance. Therefore, when the iron ore price is rising, analysts publish grim warnings that this can’t last due to too much supply. When the price falls again, the analysts feel validated that they were right, and promptly down grade price forecasts because it’s “the end”. But then the price rises again….

Why do the steel mills keep buying?

China steel mills seem unconcerned about port stocks, although it is not clear why. We do note that steel mills own two thirds of the port stocks anyway (traders the remainder) so perhaps SOEs are taking contractual cargoes, but only using the high grade portions currently while steel prices are so high? They could buy other high grade supply from the traders’ stocks. As we found on our visit to Tangshan mills at the start of May, SOEs have no concerns obtaining bank loans so may not worry about working capital. They may plan to destock later when prices are lower. And interestingly, Mysteel’s survey of around 67 small to medium steel mills which will be private, seem to have normalised inventories rather than any build up. So larger SOEs may be the culprits.

Steel mill buying follows demand, not supply

But if we leave aside the port stocks issue, then steel mills’ buying decisions are based on demand, not supply. The volatile iron ore price is actually reflecting destock-restock cycles by steel mills. One influence on the stock cycles is seasonal and predictable, another is Chinese macro factors, particularly policy decisions and is very difficult or impossible to forecast. Macro factors and seasonal demand periods guide steel mills as to whether steel demand will be strong and prices strong. If it looks promising, they want to buy ore to run flat out. And when one is buying, all start buying to beat the iron ore price peak.

How has this worked in practice?

Seasonally we reached the construction season end in June, so rebar demand should have been lower, and it has been. But equally importantly it was clear from anecdotal reports in Platts that destocking was taking place – mills were dumping contractual cargo deliveries into the spot market, liquidating to raise cash for debt repayments due at the end of June. It is clear that near the end of the month, that would cease as debts were met. Instead, the mills that had sold incoming cargoes would need to go back and buy to continue steel production – restock follows destock. And so it has played out.

As commentators searched for an explanation for the price jump, they latched onto a speech about the economy by President Xi on 27 June that was the only notable macro event. It was not a rip-roaring call by the President, but may have provided reassurance. From Reuters’ reports we see that the President said the full-year growth target could be met, said China was capable of meeting systemic risks despite challenges and noted that maintaining medium to high speed long-term growth will not be easy due to the sheer size of the economy, but the Government is committed to bolstering consumer-driven growth and curbing excess capacity in industries such as steel and coal.

No change to our 3Q price forecast of $70/t

Despite the run-up in the iron ore price it remains below our 3Q price forecast of $70/t. But our call was not based on the end of a short-term destocking cycle. Instead, we are looking towards September and October, which is seasonally a strong period for steel production and consumption – after the summer heat and rain, but before the winter freeze. If steel mills want to be producing strongly in September, they need to be booking iron ore cargoes in late July and August, and these are typically months where the price lifts. June is normally the low point for iron ore, heading into the summer steel demand lull.

Looming winter cuts may add to 3Q iron ore demand

This year there is an additional factor to consider. The Environment Ministry has its widely publicized industrial curtailments planned for 26+2 cities over winter. Smog reaches hazardous levels over Beijing-Tianjin during the winter when coal burn for heating joins the normal industrial smoke. Next winter, a change is planned by reducing industrial emissions from mid-Nov to late-Feb. The steel industry in Hebei, Henan, Shanxi and Shandong is expected to cut output by 50%, If this policy is enforced – and smog is a high priority issue – then steel output may fall by 35-45Mt over the three months. If prices remain high, steel mills will want to keep selling so it might be possible for them to over-produce and build some inventory in 2H. If this is so, then 3Q iron ore buying could be extra strong.

Ahem, not a lot of humility there. CS was telling folks that iron ore was going higher at $94. It was it that missed the destock not the other way around.

Still, there’s some reasonable arguments here. The jump in price triggered by Li’s bland comments was a surprise. Mills have been lowish on stock so may be behind some of it. But let’s face it, when Dalian open interest also soars then we can be pretty sure that China’s loony tune retail speculators (Banana Man) also played some significant role.

Those rebar stocks are also bullish and it’s true that mills follow demand. Q3 may well hold up and mills replenish their inventories though $70 as average looks a big stretch from here. $60 would probably cover it.

But the September-November period is not seasonally bullish at all. It is seasonally weak and traditionally brings in a big destock. If we combine that with what I expect to be a slowing of growth at the margin by then, then mills will indeed follow demand and shed inventories into year end. Especially so given port stocks will be even higher before then if we see some price pressure in Q3.

Daily iron ore price update (headfake) | Macrobusiness

By Houses and Holes
at 12:05 am on June 28, 2017
Reproduced with permission of Macrobusiness.

Iron ore price charts for June 27, 2017:


Tianjin benchmark roared 6% to $59.10. Coal is calm. Steel too.

The trigger of course was this, via SCMP:

China would like foreign businesses to keep their profits in the country and reinvest them, Premier Li Keqiang said in his keynote speech at the World Economic Forum in Dalian on Tuesday, although he added there would be no restrictions on the movement of their money.

Economy

China’s economic growth is gaining fresh momentum and there will be no hard landing in the world’s second-biggest economy. The unemployment rate in May dropped to 4.91 per cent, he noted, the lowest level in many years.

Market access

China will continue to open its markets in the services and manufacturing sectors. It will loosen restrictions on shareholdings by foreign companies in joint ventures and will ensure China will continue to be the most attractive investment destination.

Economic policy

The Chinese government will not rely on stimulus to bolster economic growth. Instead, it will use structural adjustment and innovation to maintain economic vitality. The government will keep stable macro policies – a prudent monetary policy and a proactive fiscal policy – to ensure clarity and stability in financial markets.

Financial risks

China is fully capable of containing financial market risks and avoiding systemic ones. There are rising geopolitical risks and increasing voices opposing globalisation. China will keep its promises in combating climate change and will work to promote globalisation.

Absolutely nothing new there. In fact it is a little reassuring to those of us that think reform is on the verge of returning.

But the market has been heavily sold and so it got excited. There is a little room for it to run given lowish mill iron ore inventories:

But, in all honesty, I’m stretching to be positive. The price jump will very quickly arrive at Chinese ports as bowel-shakingly higher inventories in short order:

And the economy is still going to slow at the margin as housing comes off leading to a destock in the foreseeable future:

The great thing about markets is they always off[er] second chances. On this occasion it is to get even more short.

The disconnect between long-term and short-term rates

Bob Doll highlighted the disconnect between long-term and short-term rates in his latest review. The chart below plots the 3-month T-bill rate against 10-year Treasury yields.

Spot Gold/Light Crude

At this stage, the disconnect is not significant. But a disconnect as in 2004 – 2005 is far more serious. Large Chinese purchases of Treasuries prevented long-term rates from rising in response to Fed tightening, limiting the Fed’s ability to contain the housing bubble.

China: Stay clear

“Never trade against the central bank” is a golden rule of trading. Rule #2 should be: “When the central bank behaves erratically, stay clear.” The PBOC announced a crackdown on wealth management products in May but alarm at the rapid contraction elicited a quick retraction.

The Shanghai Composite Index broke support at 3050/3100 signaling a primary decline. But the PBOCs sudden reversal spurred a recovery, with the index now likely to test resistance at 3300. Rising Twiggs Money Flow indicates buying pressure. Reversal below 3050 is unlikely but would confirm a primary down-trend.

Shanghai Composite Index

Shanghai retraces

The Shanghai Composite Index retraced to test support at 3100. The decline on Twiggs Money Flow indicates long-term selling pressure. Reversal below 3000 would confirm a primary down-trend.

Shanghai Composite Index

* Target medium-term: May 2016 low of 2800

Why we’re selling all shares and handing cash back to investors – Philip Parker | Livewire

Philip Parker – veteran fund manager decides to sell all shares in Altair’s Trusts to hand back cash and hands back mandates for SMA/IMA’s and also sells MDA family office mandates to cash from shares.

Why?
AUSTRALIAN EAST COAST PROPERTY MARKET BUBBLE AND THE IMPENDING CORRECTION
CHINA PROPERTY AND DEBT ISSUES LATER THIS YEAR
THE OVERVALUED AUSTRALIAN EQUITY MARKETS AND
OVERSIZED GEO-POLITICAL RISKS AND AN UNPREDICTABLE US POLITICAL ENVIRONMENT

The underlined above are some of the more obvious reasons to exit the riskier asset markets of shares and property – in my opinion.

As a result of the above and after 25 years as a fund manager and 30 years in this industry I am taking around 6 to 12 months off. The main reason is in my opinion that there are just too many risks at present, and I cannot justify charging our clients fees when there are so many early warning lead indicators of clear and present danger in property and equity markets now….

Read more at: Why we’re selling all shares and handing cash back to investors – Philip Parker | Livewire