Daily Dim-sum Set 2016-01-07

Market Appetizer:

Oh wait, is it an appetizer anymore? Market is going to finish in 15 minutes anyway…

  1. Circuit breaker triggered twice in Chinese stock market within less than 30 minutes, A-share traders take off after 15 minutes of real trading…(http://www.bloomberg.com/news/articles/2016-01-07/china-markets-in-turmoil-as-weak-yuan-fixing-sparks-stock-tumble; http://www.reuters.com/article/china-stocks-close-idUSKBN0UL06R20160107)

Commentary: An embarrassing day for the regulatory side. The circuit breaker intends to protect investors from liquidity drain, but instead it did exactly the opposite of what it originally intended. Fool me twice, shame on…It is also interesting to observe how PBOC did exactly the opposite to what CSRC intended, they lowered the fixing yet again, just to ignite what is going to happen shortly…The biggest joke on social media today is that Trader X is on his way to work during rush hour, and he is on his way back home during rush hour in the morning as well.

2. Is CNH a bomb for the market? (http://ftalphaville.ft.com/2016/01/06/2149312/cnh-bomb/; http://www.ft.com/fastft/2016/01/05/china-markets-a-theme-park-guide/)

Commentary: The logic is quite flawed – if PBOC wants to intervene, why don’t they just set the fixing higher, as they have done in the past. The fixing suggests PBoC is ok with such a “mild” depreciation, and that’s why CNH continues to trend downward. While people might lose a lot of money due to the “laissez-faire” style of PBoC, it might reflect an inconvenient truth that a correction for CNY is long due.

3. Soros says China has a real adjustment problem and calls for crisis in the market (http://www.bloomberg.com/news/articles/2016-01-07/global-markets-at-the-beginning-of-a-crisis-george-soros-says)


Commentary: You don’t ask Emperor Palpatine for his opinion on the dark side, thanks.

4. Traders quote CNH looks “stretched” in fears of possible intervention (http://www.fxstreet.com/news/forex-news/article.aspx?storyid=c88a52e4-7e8f-49a1-b1e5-5a991ddf83b9)

Commentary: At least the market is not going to speculate against the PBoC…

Policy Bun:

  1. CSRC puts a halt to “circuit breaker” mechanism – (http://www.cnbc.com/2016/01/07/chinese-securities-regulator-suspends-market-circuit-breakers.html)

Commentary: It allows willing buyers to inject some liquidity into the market, so that the market is not totally inefficient. The more I think about this, there are tons of inconsistencies within the regulatory powers, i.e. PBoC and CSRC are not on the same boat in this game.

2. CSRC imposes 1 percent cap on major share sales post-30 minute breakdown (http://www.scmp.com/business/markets/article/1898544/csrc-introduces-1-cent-cap-major-share-sales-after-markets-crash)

Commentary: Not only could major shareholder sell it in the commodity trading (大宗交易), it also leads to a serious question to institutional investors in the game – how are they going to exit? There must be a point when the regulatory just let go, not now apparently.



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