E The Daily Shot And Data - February 16, 2016

Greetings,

This morning we start with China who is getting investors’ attention again after the New Year’s holidays. Here is the latest.

1. Yesterday the yuan jumped 1.35% – the biggest one-day increase in over a decade. Supposedly this is a post-holiday catch-up. It could also be a way to stabilize the much anticipated post-holiday market open.

Source: barchart

The PBoC currency policy continues to be murky and inconsistent, providing little guidance for investors. Exchange rate liberalization remains a distant dream.

Source: @pdacosta, WSJ

2. China’s official imports from Hong Kong spiked recently.

Source: @S_Rabinovitch

This immediately raised some eyebrows …

Source: Bloomberg

Generating fake or bloated import receipts allows some businesses to move money out of mainland China and skirt capital controls. This tells us that outflows from China continue.

3. China’s new loans spike to record levels as the nation goes on a seasonal credit binge.

Source: ?@enlundm

Some of this was due to firms switching liabilities out of dollars into yuan in order to cut their currency risk. But speculative property demand also contributed.

This latest phase of growth is being driven by credit. This chart shows the M2 money supply per GDP – a good relative indicator of bank credit in the system.

Source: @Schuldensuehner, @BloombergBrief

Of course investors are also watching carefully the deterioration of private credit quality at China’s banks.

Source: Bloomberg TV

Note that if one includes total local government debt, China’s credit growth is accelerating, not slowing. Beijing’s goal seems to be maintaining growth at any cost.