Dim-sum Set 2016/01/11-12

Market Appetizer:

  1. Offshore RMB erased losses , while RMB lending rates soared to all time high (http://www.bloomberg.com/news/articles/2016-01-11/hong-kong-yuan-interbank-rate-rises-by-record-to-all-time-high;http://www.bloomberg.com/news/articles/2016-01-11/offshore-yuan-drops-as-economic-data-spur-depreciation-concern)currencyspread.png

Commentary: PBoC is trying to create a stringent liquidity situation so that the short side can no longer borrow and conduct further speculative attack. On the other hand, short traders are taking profit for now- at least a temporary sign of relief for the CNH. The aftermath of this is, however, whether we need a change in our FX policy or should we just kick the can down the road and react whenever there is another semi-crisis on the way?

2. China market fell 5% yesterday as policy jitters remains unsettled (http://www.cnbc.com/2016/01/10/asian-stock-markets-weighed-by-china-markets-slowdown-worries-oil.html)

Commentary:  The real problem here is not policy antidotes, but rather a false anticipation of inconsistencies and uncertainty, which cannot be cleared out within a short span of time. It takes patience, but also

Policy Bun:

  1. State Council establishes new office of coordination for financial and economic affairs (http://www.bloomberg.com/news/articles/2016-01-11/china-said-to-create-new-office-coordinating-finance-and-economy-ij9u5y20)

Commentary: As regulatory framework in China has been fragmented, it is yet another try to align different department’s interests into one single office. But once again, China already has Central Financial Working Office (中央财办), how is this office any different from the previous one and how is it going to function efficiently against potential market challenges against China?



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