Ok, we’re going to talk about China again because as we noted on Friday, you really should be watching the situation over there closely.
A variety of factors conspired to push down Hong Kong and mainland shares recently. The initial catalyst was a mini-rout in the bond market and a precipitous decline in liquor maker Kweichow Moutai (see here) and no sooner had that partially abated than the tech selloff that hit Wall Street on November 29 spilled over and dented the Hang Seng.
All of this is extremely important as the bond selloff speaks to the possible knock-on effects of Beijing’s efforts to squeeze AMPs and the pressure on tech in Hong Kong underscores the risk that a sudden rotation out of the names have led the global rally this year could dent sentiment more broadly.
Given all of that, we suggested on Friday that you shouldn’t ignore the rebound we saw headed into the weekend and indeed that rebound continued on Monday.
In Hong Kong, the Hang Seng China Enterprises Index was up again today and all you have to do is glance at a chart to see why we really needed things to turn around in a hurry:
The Hang Seng itself was up a second day, and again, you can see why we needed it. The benchmark was coming off two straight weeks of declines which began just after it crossed 30,000 for the first time in a decade:
On the mainland, it was a sea of green as well with the CSI 300 up 1.7%, bringing the two-day gain to 2.5%, the largest since the end of August and one more time: you can see why it was important to turn things around…
One final thing to note here. Monday’s rally is being at least partially attributed to news that Beijing may end up extending a deadline for financial institutions to comply with the new rules on asset management products – those would be the rules that triggered the bond market selloff.
And those would be the rules aimed at squeezing a clusterfuck that amounts to 135% of GDP and that is the size of the combined balance sheets of the Fed, the ECB, and the BoJ:
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