Tag: finance

For the 5th month in a row (and 10th of last 11), S&P Case-Shiller Home Price growth YoY missed expectations. February saw prices rise 5.38% (below 5.5% exp) which is the weakest annual growth since September 2015. Seattle and San Francisco rose the most MoM as Cleveland and New York saw the biggest drops MoM.

Weakest home prices appreciation since September 2015 and the misses continue…

 

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite’s year-over-year gain was 5.4%, down from 5.7% the prior month.

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One of the more important companies reporting today was commodity king Freeport McMoRan which in 2016 has seen its stock plunge then surge on hopes the Chinese bubble reflation will push commodities higher. So far it has worked, but far more important was what FCX’ own assessment of the future was: was it preparing for a strong rebound, or instead, was it slashing costs and firing employees in another confirmation that the recent rally has been, as Bank of America’s “smart money” clients admit for 13 consecutive weeks, nothing but fumes. It was the latter, because in addition to reporting poor earnings numbers that were largely in line with expectations, the company also announced that it would fire 25% of its oil and gas employees, hardly a ringing endorsement for the future prospects of the energy space.

From the report:

During first-quarter 2016, FCX conducted a formal process involving multiple third-party oil and gas industry and financial participants to evaluate alternatives for the oil and gas business. Further weakening in oil and gas prices and negative credit and financing market conditions during first-quarter 2016 had a significant unfavorable impact on the process. While the process did not identify a buyer for the entire oil and gas business, a number of parties have interest in select assets, and FCX continues to engage in discussions with parties interested in potential asset or joint venture transactions.

 

In the interim, FCX is taking immediate steps to reduce oil and gas costs further. In April 2016, FCX announced a new management structure and is instituting an approximate 25 percent oil and gas workforce reduction. The newly structured oil and gas management team is actively engaged in managing costs and developing plans to preserve and enhance asset values. FCX expects to record a charge of approximately $40 million in second-quarter 2016 associated with workforce reductions and other restructuring costs.

We fully expect these newly designated “waiters and bartenders” to be touted by the US Labor Secretary as yet another confirmation of Obama’s great economic recovery.

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Following February's dismal drops across the board in Durable Goods, expectations were high for a March rebound. However, the mean-reverters were greatly disappointed as Orders rose just 0.8% MoM (missing expectations of a 1.9% surge) off a revised lower print, pushing the YoY change back into the red. Core Durables Goods Orders fell YoY for the 14th consecutive month – a streak never seen in 60 years outside of a broad US recession. Capital Goods Orders (0.0% vs +0.6% exp) and Shipments (+0.3% vs +0.9% exp) both missed and were both revised lower. Not a pretty picture…

 

The headline Durable Goods Orders printed back in the red YoY…

 

But a 14th consecutive monthly drop in YoY Core Durable Goods Orders has never happened outside of a recession…

 

It really is different this time.

 

Charts: Bloomberg

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2016 has been a tempestuous year for Serepta shareholders. From over $40 to just $10 and then the miracle ramp from february back to $25 before the writing on the wall ahead of last night’s FDA decision and now – following yesterday’s monstrous short-squeeze (36% surge), a 50% collapse to $8 – a 4 year low for yet another Biotech darling of old. This morning’s collapse comes after the FDA voted that SRPT’s muscular dystrophy drug was not effective…

 

 

As Bloomberg reports,

An FDA advisory panel voted 7-3 with 3 abstentions that Sarepta’s single historically controlled study doesn’t provide substantial evidence that eteplirsen is effective for treatment of Duchenne muscular dystrophy (DMD).

 

Some panel members raised questions about study design, said more data are needed.

Not a great morning for Stevie Cohen who just upped his stake (seems he did not get the nod this time)…

 

Any questions, refer to Christopher Marai or Chad Messer (PhD!)…

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One week ago we were surprised to learn that no matter what the market was doing, whether it was going up, down or sideways, Bank of America’s “smart money” (institutional, private and hedge funds) clients, simply refused to buy anything, and in fact had continued to sell stocks for a near-record 12 consecutive weeks.  In fact, the selling continued despite what we said, namely that “at this point it was about time for the selling to stock, if purely statistically, otherwise said “smart money” would be sending the clearest signal yet that the market rally from the February lows is nothing but a huge gift to sell into.”

One week later we were absolutely convinced that finally the selling would end. It has not.

As BofA reported overnight when looking at the latest trading activity by its smart money clients, the selling of US stocks by this most “sophisticated” group of investors continued for the thirteenth consecutive week last week, making it the longest uninterrupted selling streak in BofA data history (since 2008) “as clients continued to doubt the market rally.“

According to BofA, “net sales were $3.8bn, the biggest in three weeks but the sixth-largest in our data history (since ’08), with sales from hedge funds, private clients and institutional clients alike. This follows a week of net buying by hedge funds the prior week; institutional and private clients have both been consistent net sellers since February. Clients sold stocks in all three size segments, and year-to-date only small caps have seen cumulative inflows.”

While clearly this confirms that the so-called smart money not only refused to buy into the rally and merely looked to sell into the market move higher, it does not explain why the forced selling pressure that has been relentless for three months in a row; perhaps it is redemption requests, perhaps it is merely pervasive bearishness and lack of faith that central planners have regained control; one thing is certain: the “smart money” is once again drastically underperforming the market, which will accelerate the vicious cycle loop of even more redemptions, even more selling, until finally the corporate buyback bid is exhausted and is unable to offset the accelerating and relentless liquidations by “smart money” accounts.

So what did BofA’s clients sell (or buy)?

Clients sold stocks in nine of the ten sectors last week, led by Tech and Industrials; clients also sold ETFs. Only Energy stocks saw net buying, as oil prices continued to rebound—this was the first time clients were buyers of Energy stocks in seven weeks, entirely due to institutional clients’ flows. Cyclical sectors continued to see larger sales than defensive sectors—though we note that Health Care—which has been hurt by a positioning unwind and political uncertainty in an election year—continues to have the longest net selling streak of any sector at eight consecutive weeks. Year-to-date, only Telecom and Materials have seen cumulative inflows (with Telecom buying led by private clients, and Materials buying chiefly due to corporate buybacks).

Worth noting that among the net buying were ETFs, which smart money clients have been buying since early April. Meanwhile, in the Net selling category: Tech since late Jan.; Staples since early Feb.; Industrials since mid-Feb.; Energy and Financials since late Feb; Telecom, Materials and Health Care since mid- March; Consumer Discretionary since late March, Utilities since early April.

 

So with everyone once again selling, who bought? ” Buybacks by corporate clients picked up last week, but were still below-trend (as buybacks are seasonally light in April)”

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One day after a sliver of a bullish Gartman peeked out, when he announced that he was “slightly net long of equities“, it would appear that yesterday’s red close prompted the “world-renowned” commodity expert (according to his family relations at CNBC Fast Money), to do what he now tends to do on a daily if not hourly basis, and is back to being “cautious… perhaps defensive.”

First, this is what he said just yesterday morning:

We, here at TGL, are very, very, very slightly net long of equities, for we are long of gold in EUR and Yen denominated terms of course, but we’ve had those positions on for months in the case of the EUR and for years in the case of the Yen. Indeed, we do not consider those to be “equity” positions at all, but we have to mark them somewhere in our commentary and this is the only place that seems reasonable, and so they are marked here…. So, we’ve punted bullishly, but again by only a very small sum.

Shortly after this hit, stocks promptly dropped and closed in the red despite another inexplicable last minute jump in the S&P.

Maybe that is why as of this morning his bullish punt is no more, and instead has been replaced with “caution… perhaps very real defensiveness“. Here’s why:

we note that the CNN Fear & Greed Index, having risen late last week once again to 75… the level the creators of the Index have referred to as “Extreme Greed”… has fallen back from those highs and closed last evening at 70.

 

 

The Index has spent the past seveal weeks forging what appears to us to have become a material “top” of some very real consequence. It “peaked” last autumn near 75 before stocks, as measured by the S&P, fell from 2075 to 1800 in a matter of weeks, and it peaked early last year at or near 80 before the S&P fell from near 2100 to 1800 also. In this regard, perhaps caution…perhaps very real defensiveness… is a  reaosnable [sic] path to be taken.

Could this be the time he is right? For now futures are green so early indications are not looking good.

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Swift, the vital global financial network that western financial services companies, institutions and banks use for all payments and transfer billions of dollars every day, warned its customers yesterday evening that it was aware of cyber fraud and a number of recent “cyber incidents” where attackers had sent fraudulent messages over its system and $81 million was apparently stolen from a central bank.

SWIFT (Wikipedia)

As reported by Reuters, the disclosure came as law enforcement agencies investigate the February cyber theft of $81 million from the Bangladesh central bank account at the New York Federal Reserve Bank. Swift has acknowledged that the scheme involved altering Swift software on Bangladesh Bank’s computers to hide evidence of fraudulent transfers.

Yesterday’s statement from Swift marked the first acknowledgement that the cyber attack on  the New York Federal Reserve Bank was not an isolated incident but one of several recent criminal schemes that aimed to take advantage of the global messaging platform used by some 11,000 financial institutions.

“Swift is aware of a number of recent cyber incidents in which malicious insiders or external attackers have managed to submit Swift messages from financial institutions’ back-offices, PCs or workstations connected to their local interface to the Swift network,” the group warned customers.

The warning, which Swift issued in a confidential alert sent over its network, did not name any victims or disclose the value of any losses from the previously undisclosed attacks.

Swift, or the Society for Worldwide Interbank Financial Telecommunication, is a co-operative owned by 3,000 financial institutions. Also, Swift released a security update to the software that banks use to access its network to thwart malware that security researchers with British defense contractor BAE Systems said was probably used by hackers in the Bangladesh Bank heist.

Cyber security experts said more attacks could surface as SWIFT’s banking clients look to see if their SWIFT access has been compromised.

Shane Shook, a banking security consultant who investigates large financial crime, said hackers were turning to SWIFT and other private financial messaging platforms because such attacks can generate more revenue than going after consumers or small businesses.

“These hacks specifically target financial institutions because smaller efforts result in much larger thefts,” he said. “It’s much more efficient than stealing from consumers.”

Full Reuters article is here

We have for some time warned of the risks posed by cyber fraud and war to banks, savings and indeed investments. The apparent theft of $81 million from a central bank from an account at the New York Federal Reserve shows this.

Cyber theft is a real risk for all digital or virtual wealth today – whether that be digital bank accounts and deposits or electronic stock and other exchanges.

Fintech solutions involving the vitally important blockchain cometh and not before time. However, many of these solutions are also vulnerable in the short term as the nascent industry grows and the best solutions survive and thrive and less safe ones are slowly found out by the market and disappear.

The risks posed to bank deposits, markets and indeed all online investments and savings by hacking, cyberterrorism and cyberwar remains not understood.

Given these real risks, tangible gold becomes not important but a vital means of preserving wealth. Physical gold coins and bars, due to their tangible nature, are not vulnerable to crises that may afflict electronic digital currency and other digital wealth.

Those who hold physical gold and silver coins and bars outside the banking system as an insurance policy would certainly weather the storm better than those who do not.

The hope is that these risks will not materialise. Hope is not a strategy. We believe it is prudent to be aware of and take appropriate measures to protect your wealth.

Our modern western financial system with its massive dependency on single interface websites, servers and the internet faces serious risks that few analysts have yet to appreciate and evaluate. These also pose risks to digital gold providers who do not allow clients to interact and trade on the phone and are solely reliant on online trading platforms.

Jim Rickards, the leading expert on currency wars and risks posed by cyber fraud to people’s, company’s and indeed nation’s wealth commented to GoldCore about the cyber theft:

“Bangladesh is one of the poorest countries in the world. $100 million of their money disappeared. The money was on deposit with the Federal Reserve Bank of New York, the safest bank in the world. The culprits hacked SWIFT, one of the most secure message traffic systems in the world. If the Fed and SWIFT aren’t safe, nothing is safe. If Bangladesh had held physical gold, they would still have their money. The case for owning gold in an age of cyber-financial threats is compelling.”

Recent Market Updates
Gold In London Vaults Beneath Bank of England Worth $248 Billion – BBC

Silver Prices Up 6% This Week and 25% YTD; Gold Up 1% This Week

Gold Price Set To Push Higher As Inflation Picks Up – RBC

Silver Bullion “Has So Much More to Give” – 5 Must See Charts Show

China Gold Bullion Yuan Trading To Boost Power In Gold and FX Markets

Marc Faber: “Messiah” Central Banks Helicopter Money Printing “Will Not End Well”

Gold News and Commentary
Gold ends higher ahead of central bank meetings (Marketwatch)
Gold climbs as dollar lends support ahead of Fed meeting (Reuters)
Gold Rises, Copper Falls as U.S. Home Sales Sag a Third Month (Bloomberg)
Sales of New U.S. Homes Fall for a Third Month on Slump in West (Bloomberg)
China debt load reaches record high as risk to economy mounts (FT via CNBC)

Macro picture sees precious metal shine (FT Adviser)
Gold, already on its way up, may head even higher: Technician (CNBC)
World Witnessed Socialism’s Death … Central Banking Is Next (Gold Seek)
Depression, Debasement, & 100 Years Of Monetary Mismanagement (Zero Hedge)
When will the Fed stop propping up the US stockmarket? (Money Week)
Read More Here

Gold Prices (LBMA)
26 April: USD 1,234.50, EUR 1,093.46 and GBP 847.28 per ounce
25 April: USD 1,230.85, EUR 1,094.08 and GBP 853.79 per ounce
22 April: USD 1,245.40, EUR 1,104.34 and GBP 868.73 per ounce
21 April: USD 1,257.65, EUR 1,113.21 and GBP 877.01 per ounce
20 April: USD 1,247.75, EUR 1,098.09 and GBP 867.45 per ounce

Silver Prices (LBMA)
26 April: USD 16.86, EUR 14.98 and GBP 11.67 per ounce (Not updated yet)
25 April: USD 16.86, EUR 14.98 and GBP 11.67 per ounce
22 April: USD 17.19, EUR 15.26 and GBP 11.96 per ounce
21 April: USD 17.32, EUR 15.31 and GBP 12.05 per ounce
20 April: USD 16.97, EUR 14.93 and GBP 11.81 per ounce

 

 

 

Read Our Most Popular Guides in Recent Months

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Is the stock market setting up for a Crash?

For the first time since the 2009 bottom, Earnings Per Share (EPS) have diverged sharply to the downside from stocks.

There are a lot of reasons why investors buy stocks… but at the end of the day, they all boil down to earnings: the company is only a sound investment if it actually makes money.

The above chart shows us that earnings recently peaked and have diverged sharply from stock prices. Here’s a close up of the last three years:

By this analysis, stocks could easily fall to 1600 to return to a proper valuation. That is 24% below current levels and would qualify for a crash.

 

The time to prepare for this bubble to burst is now. Imagine if you'd prepared for the 2008 Crash back in late 2007? We did, and our clients made triple digit returns when the markets imploded.

We're currently preparing for a similar situation today.

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

You can pick up a FREE copy at:

http://ift.tt/1rPiWR3

Best Regards

Phoenix Capital Research

 

 

 

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• The Fed Is Meeting in April to Talk About June (BBG)
• Global stocks, oil prices climb as investors ready for Fed (Reuters)
• Apple Results to Show How Far iPhone Sales Have Fallen  (BBG)
• On Election Eve for five states, Trump rips Cruz and Kasich (Reuters)
• President Xi Jinping’s Most Dangerous Venture Yet: Remaking China’s Military (WSJ)
• Oil’s Recovery Inches Higher as ‘Fracklog’ Awaits Price Trigger (BBG)
• Malaysia’s Reputation Takes Another Hit as State Fund Defaults  (BBG)
• Citadel Tops List of Private U.S. Trading Venues (NYT)
• Mitsubishi Motors says it used non-compliant mileage data for 25 years (Reuters)
• BP Results Still Hurt by Gulf of Mexico Spill (WSJ)
• Canada is subsidizing foreign millionaires (Canada)
• Earnings Blowups Send Tech Traders to Options Market for Hedges (BBG)
• Saudi Arabia Approves Economic Reform Program (WSJ)
• Obama calls for strong, united Europe (AFP)
• Taxpayer Subsidies to Companies Fall 70% as U.S. States Pull Back (BBG)
• Driven up the wall by Trump, Mexico looks to recast image in U.S. (Reuters)
• Goldman Says China’s Iron Speculation ‘Concerns Us the Most’ (BBG)
• Ex-CIA Agent Loses Appeal Against Extradition to Italy (BBG)
• Goldman Bank Website Caps Quiet Shift Before New U.S. Cash Rule (BBG)
• U.S. Ospreys win Japanese hearts and minds with quake relief flights (Reuters)
• Macau Casino Stock Rally Seen Unsustainable as Downturn Endures (BBG)

 

 

Overnight Media Digest

WSJ

– U.S. Federal regulators are poised to approve Charter Communications Inc’s $55 billion acquisition of Time Warner Cable Inc, but they will force the merged company to live up to stringent obligations that don’t apply to its bigger rivals. (on.wsj.com/1SFDIPc)

– Stock markets across Asia were generally lower Tuesday as investors stayed cautious ahead of central bank meetings this week in Japan and the United States. (on.wsj.com/1Taq2Je)

– Chocolate maker Hershey Co has a solution for America’s waning taste for candy: beef snacks. The 122-year-old company is betting that dried meat bars are the new chocolate bars. (on.wsj.com/1TtD5rV)

– Donald Trump is poised to sweep five states’ Republican primaries on the Eastern Seaboard on Tuesday, but his rivals are already looking ahead to next week’s contest in Indiana, which may be their last chance to keep Trump from clinching the party’s presidential nomination. (on.wsj.com/23XxfHG)

 

FT

Husky Energy Inc said on Monday it will sell 65 percent ownership in select midstream energy assets in Canada to Cheung Kong Infrastructure Holdings Ltd and Power Asset Holdings Ltd for C$1.7 billion.

Volkswagen AG has not fixed any of the 1.2 million cars in Britain affected by the diesel emissions scandal, a British transport minister said on Monday, despite the company having said it had begun software modifications to some models.

Tribune Publishing Co is reviewing an unsolicited and possibly unwelcome $815 million takeover bid from Gannett Co Inc, a move by Gannett to gain scale as the newspaper industry continues to consolidate.

 

NYT

– Valeant Pharmaceuticals International Inc said on Monday that Joseph C. Papa, the head of the drug maker Perrigo , would take over as chief executive, replacing the embattled J. Michael Pearson. (http://nyti.ms/1rw0a4t)

– Advisers to the U.S. Food and Drug Administration voted on Monday not to recommend approval of Sarepta Therapeutics’ drug for Duchenne muscular dystrophy. (http://nyti.ms/1rw0yjB)

– U.S. federal regulators on Monday moved to approve Charter Communications ‘ $65.5 billion acquisitions of Time Warner Cable and Bright House Networks, enabling the creation of a new cable giant as the industry focuses more on broadband as traditional TV declines. (http://nyti.ms/1UdpyHf)

 

Britain

The Times

Philip Green and the owners of BHS are facing an investigation into their running of the retail chain after the pensions watchdog said it had begun looking at whether they had attempted to avoid plugging a hole in the company’s retirement fund of more than 200 million pounds ($289.72 million). (http://bit.ly/1Ttz0nC)

The plan to create Britain’s largest mobile phone network provider is set to be derailed by European regulators, who will veto the 10.25 billion pounds takeover of O2’s UK network by CK Hutchison Holdings ltd, the owner of Three. (http://bit.ly/1TtzUAo)

The Guardian

The British Broadcasting Corporation’s director general is understood to have met with finance minister George Osborne in an attempt to head off government attempts toward contestable funding under which some of the money from the licence fee could be used for organisations other than the BBC. (http://bit.ly/1TtA0rU)

Britain should withdraw from the European convention on human rights regardless of the EU referendum result, Home Secretary Theresa May has said, in comments that contradict ministers within her own government. (http://bit.ly/1TtA9vu)

The Telegraph

Channel 4’s new chairman has launched a search for ethnic minority and disabled non-executive directors amid concerns that the broadcaster’s board does not reflect its government-imposed diversity remit. (http://bit.ly/1TtAxtO)

Sky News

British department stores group BHS has gone into administration, putting 11,000 jobs at risk and threatening the closure of up to 164 stores. (http://bit.ly/1qNEWy5)

Marc Bolland is to join the board of British Airways parent IAG, weeks after stepping down as the boss of Marks and Spencer Group, Sky News has learned. (http://bit.ly/1TtyGVW)

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In early 2016, the biggest global macroeconomic risk factor was the accelerating capital outflows out of China over fears of currency devaluation (or simply because the local population knows better than anyone just how dire to domestic situation is and is rushing to park its assets offshore) and with good reason: after the PBOC burned through $1 trillion in reserves to offset capital flight starting in the summer of 2014, even the IMF chimed in with a concerned report suggesting China may have at most another half a trillion “buffer” left before it runs into illiquid assets which would prove virtually impossible to liquidate easily in the open market.

It got so bad that in January and early February, US equity futures would surge or slump based on a Yuan fixing that was a few basis point lower or higher than expected.

But then, almost as if on cue, following three consecutive months of nearly $100 billion in outflows, in February the capital flight slowed sharply and then proceeded to reverse (not if one includes FX adjustments but these days who actually does math) in March, leading to the first Chinese reserve increase since October. (assuming of course one believes Chinese data; one reason why one should not is everything that is currently going on in Vancouver real estate which proves the capital outflow has never been stronger).

So perhaps as a result of the rapid reversal in reserve liquidation or the stabilization in the offshore Yuan rate (where the PBOC has been particularly active in punishing shorts), fears about Chinese capital flights have been relegated to the back pages. Which is paradoxical, because not only have none of China’s underlying problems been addressed, the only way China managed to sweep its all too glaring problems under the rug was with the aid of $1 trillion in new Q1 loans.

Of course, it was concerns about soaring bad debt (as well as a hard landing economy and plunging exports, but those are all derivatives of China’s 350% in debt/GDP) that got China where it was in the summer and winter of 2015 in the first place, when it first started devaluing its currency. So to suggest that by adding even more debt on top of what was a debt problem somehow fixed it, well, debt problem is something only a full Krugman could suggest.

Which is why we were not surprised to read that according to the latest Institute of International Finance forecast, and in validation of Kyle Bass’ strong conviction that China is about to suffer a major 15%+ devaluation, China’s capital outflow headaches may be only just starting. According to the IIF’s latest report released today, global investors are expected to pull $538 billion out of China’s slowing economy in 2016, which means another $420 billion after the $118 billion that has already been withdrawn in Q1.

That number would be down a fifth from the $674 billion pulled out last year, the industry association said, but could be a stark acceleration from $118 in reserves sold in the first three months of the year as fears re-emerge of a “disorderly” drop in the yuan, or the renminbi, as the currency is also known.

“A sharp drop in the renminbi would likely spark a renewed sell-off of global risk assets and trigger a flight of portfolio capital from emerging markets,” the IIF said in a new report.

“Moreover, a sharp depreciation of the renminbi could lead to a round of competitive devaluation in other emerging markets, particularly in those with close trade linkages to China.”

As noted above, for now, however, outflows are slowing. Roughly $35 billion was pulled out in March, bringing the total since the start of the year to around $175 billion, well below the pace seen in the second half 2016.

The IIF cited progress Chinese authorities had made in easing worries about the yuan’s direction. Once again, we fail to see what those are aside from one more trillion in loans and another unprecedented round of fiscal stimulus.

Ironically, the IIF forecast that:

• We project net capital outflows to slow to $538 billion in 2016 from $674 billion last year, supported by a gradual recovery in non-resident capital inflows. However, there remain risks that outflows could accelerate again if concerns about RMB depreciation intensify again

Which is certainly not improvement but actually a sharp deterioration to the latest runrate inflow, considering it took the Shanghai Accord and countless central bank interventions to stabilize the Yuan, and the halt the Chinese outflows. The IIF’s forecast is implicitly suggesting that what has been achieved is nothing but a pyrrhic victory and over the next three quarters, China is about to see another $420 billion in outflows, a dramatic deterioration to the status quo, one which would return the market into a full blown sell-off mode as that encountered at the end of 2015 and first two months of 2016 when panic over China’s soaring outflows was all the rage.

So did the IIF just tacitly open the next Pandora’s box in China’s capital flight tale? In its own conclusion, the IIF hopes for the best:

In our baseline projections, capital outflows and pressure on the RMB persist through 2016, but diminish in intensity as policymakers persuade investors that they will be successful in stabilizing the RMB’s value.

With brute central bank intervention to punish anyone found shorting the CNH. Anyway, continuing:

Greater confidence that the economy is on track to meet the growth target of 6.5-7 percent would also help. Most of the improvement is projected to
be in a turnaround in non-resident capital flows, while resident outflows and errors and omissions are forecast to moderate more gradually

That confidence won’t come to anyone who does an even cursory look behind the scenes because as we have reported over the past week, none of the Chinese numbers – be they imports, annualized GDP or province level GDP – actually make any sense.

The IIF conludes as follows:

Nonetheless, China remains vulnerable to a renewed intensification of capital outflows, particularly if doubts about the stability of the RMB were to come to the fore again. In particular, stress could rise through a combination of a stronger USD—particularly if the market comes to believe that the Fed will tighten more quickly than currently priced in—and further disappointment about China’s growth momentum.

So yes, any Fed rate hikes and we are right back out of the eye of the hurrican, but even more amusing would be if we end up in the same spot if after reading this report the market realizes that after managing to restore inflows, China is now expected to see another $400 billion in outflows for the rest of 2016 as per the IIF’s “benign” forecast, and proceeds to panic all over again.

Source

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