Home > Feb 2018 > Feb 9, 2018 PBoC did release some liquidity tonight

Feb 9, 2018 PBoC did release some liquidity tonight

February 9th, 2018

They normally do this before the New Year because so much money is withdrawn to fill the Red Envelopes. Yet, it could also be a small lifeline to the huge Sell Off the Asian Session went through following the US Sell Off. What is interesting is that China Bonds haven’t been hit at all and are about flat in all of this. With that, imho, it looks like PBoC won’t be aggressive for awhile. China CPI and PPI missed estimates. Bitcoin is under 8,000. FUTURES are Up .35% Senate passes bill to end govt shutdown sending it to the house. EDIT…ALSO, China is going to ADD OIL FUTURES TRADING SOON…this would allow them to move away from using USD’s in Oil Trading. FWIW, the Dollar is loosing it’s strength as the Global Currency.

Feb 2018

  • Trading_Nymph

    From Bloomberg…After a wait of about a quarter of a century, the world’s biggest oil buyer is finally getting its own crude-futures contract.

    In a challenge to the world’s dollar-denominated oil benchmarks Brent and West Texas Intermediate, China will list local-currency crude futures in Shanghai on March 26, according to the nation’s securities regulator. The start of trading, open to foreigners, will mark the end of years of delays and setbacks since China’s first attempt at a domestic contract in 1993.

    If the futures are embraced by overseas investors and become a benchmark for global oil transactions, China’s hoping the yuan could challenge the dominance of the greenback in international trade. Still, skeptics say that won’t happen as long as the currency is controlled by the central government, and while international traders may agree to settle contracts converted into yuan, they’ll continue to price the oil in dollars.

    “This is a first small step toward China becoming a more active price setter in oil, but for Shanghai to come anything close to a global benchmark, it will take years,” Michal Meidan, an analyst at industry consultant Energy Aspects Ltd., said before the announcement. “While this gives another impetus to liberalise the yuan, there are bigger obstacles related to volatility and capital outflows that will dictate the pace.”

    The futures will trade on the Shanghai International Energy Exchange, a unit of the Shanghai Futures Exchange, Securities Regulatory Commission spokesman Chang Depeng said at a briefing in Beijing on Friday.

    READ: How China Is About to Shake Up the Oil Futures Market: QuickTake

    While some details of the contract such as the size (1,000 barrels per lot) and grades have been released, other information like the delivery depots for the crude are yet to be announced.

    “The intention is to release more details as the launch date approaches,” Meidan said on Friday. “If the date has been settled, then it is pretty close to a finalized contract, because at this point, both Beijing and the Shanghai Futures Exchange can’t afford for the start-up to go wrong.”

    China’s trying where others, including Russia, have stumbled. While international investors may prove circumspect, there’s little doubt the Chinese will embrace their own oil futures enthusiastically. Trading in contracts across the nation’s three commodity exchanges has exploded in recent years, as speculators buy and sell everything from iron ore to soybeans with such intensity that regulators have repeatedly stepped in to quell fears of a bubble.

    Heavy volumes dwarf open interest in the exchanges, raising concern about excessive speculation and the reliability of the contracts as a benchmark.

    While Meidan expects some traders will want to get in on the oil contract, she believes they have reason to be wary. “People still remember all the speculation that occurred on the various Chinese exchanges that made the government step in,” she said. “So it’s the broader question about government control, not just the yuan, that will make traders cautious about using the contract.”

    Top Importer

    China surpassed the U.S. as the world’s biggest oil importer last year, buying about 8.43 million barrels a day to feed demand from government-run as well as independent refiners. The nation has also been hoarding millions of barrels for its Strategic Petroleum Reserve. Rather than buying how much ever crude they want, private companies have to adhere to government-issued quotas for their purchases. And this year such allocations expanded.

    “The ability for foreign producers and consumers to price hedging contracts on a domestic China commodities exchange using yuan is a game changer,” said John Browning, Shanghai-based managing partner at BANDS Financial Ltd., one of the brokerages approved for offshore trading on the contracts.

    “Apart from consumers and producers, for investors and commodity arbitragers, the Chinese commodity futures markets are deep pools of liquidity that international traders have been clamouring for access for many years,” Browning said.

    Trading Houses
    International commodity trading houses such as Mercuria Energy Group Ltd., Vitol Group and Glencore Plc could potentially use the futures for trading arbitrage and hedging, according to Chen Tong, an oil analyst with Tianjin-based First Futures Co. The contract may also be attractive for financial institutions such as investment banks and funds, he said before the announcement.

    “First, the trading volumes need to get active, then domestic refiners need to end up using it as a benchmark for trading, and eventually it could reach its aim of becoming a pricing benchmark for Asia,” Chen said. “For yuan internationalization, of course, it fits the mission, with more and more oil-producing countries moving away from dollar-linked oil contracts.”

  • Trading_Nymph

    Panther you know that the feeling of a market top is so surreal. Everyone is saying that it’s just a pullback, buying opportunity, etc…Japan owns so much of their ETF market, it will be surreal when they can’t hold it up

  • Trading_Nymph

    From Bloomberg…Investors got a stark reminder of how fast their bets can turn in China, where the most bullish trades are falling apart.

    The country’s currency was their latest favorite to succumb to a rout that has roiled financial markets around the world this week, losing as much as 1.2 percent on Thursday for the biggest decline since the aftermath of its 2015 shock devaluation. That follows a selloff in large caps and banks that has wiped out about $828 billion from the value of Chinese equities.

    Traders are running out of places to hide in a nation where market declines have a habit of snowballing. Government bonds are offering little in the way of comfort, and even commodities are feeling the squeeze. Making matters worse is the prospect of seasonally tighter liquidity ahead of the Lunar New Year holiday, according Oanda Corp.’s Stephen Innes.

    “People are aggressively taking profit,” said Innes, Asia Pacific head of trading at Oanda in Singapore. “They just want to unwind risk and take cash. The slide of Chinese equities in the past few days has definitely had an impact on the currency.”

    China’s markets started the year strongly, with the onshore yuan gaining more than any other currency in Asia and the Shanghai Composite Index rising almost every session in January. Signs of overheating quickly popped up everywhere, as gauges tracking the country’s energy stocks, financial firms and consumer staples all reached overbought levels last month. They’ve been among the hardest hit in the past four days.

    Investors are continuing to flee risk around the world despite calls to buy the dip. The selloff is testing the resolve of China’s “national team,” as state-backed funds are called, to step in to keep markets stable. But signs of buying have been few and far between, with the Shanghai index set to suffer its first so-called correction in 743 days, the longest such streak in history. It dropped as much as 4.3 percent on Friday.

    Worse-than-expected trade surplus data finally broke the resilience of the yuan, which appeared to take on the surprising role of a haven asset this week. It was the world’s worst-performing major currency on Thursday. The onshore yuan slipped another 0.1 percent to 6.3270 per dollar on Friday.

    “It’s a combination of factors including stronger dollar, the nervousness in the equity market and the heavy positioning accumulated earlier that’s caused the decline,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd.

  • panther341

    i really think this might be a top and the reason is the bond vigilantes seem to be back. Even CNBC has now brought out the phrase bond vigilante. That is from times gone by. LOL

    Millenials and those in the market only less than 10 years have never seen a sell off and they aren’t buying in this heavy volatility. Add margin calls to that and ….

  • panther341

    The other thing I am noticing: XOM went from 52 week high to 52 week low in like a week. This could be a signal in oil. Many of the oil service stocks like RIG and HAL made the 52 week highs last year in February but aren’t on their lows quite yet. https://uploads.disquscdn.com/images/7882b73a103b54a9c37e19a684d87f135e0765d74cb82bcc3ee5c442a687b434.png

  • panther341

    to me this indicates more downside in oil.

  • Trading_Nymph

    Panther….Plus we have most of the trades being Algo driven Margin trades and it makes my 1755 SPX a really nice quick drop place. This is really going to be a major test for China Govt to see if they can be prudent when their property market starts to drop. Since 2009 our world has seen Debt to GDP rise in a way that has never been seen before. You can’t get out of Debt by getting another Credit Card…but that is what the worlds economist really thought they could do.

  • panther341

    flight to quality. not spending alot of time looking for it but it isn’t bonds or oil. or gold. dollar is up.

  • Trading_Nymph

    Panther China creating Oil Futures is such a game changer for Oil..starts in March

  • Trading_Nymph

    I am just absorbing it all. They have created such a scary ugly bubble. I share Jim R’s view that this is going to be the worse crash we have ever seen.

  • Trading_Nymph

    Iron…trivia China’s GDP to Debt is now over 260%..Japan’s around 250%

  • Trading_Nymph

    Ashraf Laidi indicated that “Today’s selloff is occurring during the most synchronized policy tightening among the world’s major central banks, raising more credible fears about eroding “easy money” than any time during the last four years’….I would disagree, Japan has been “talking up” loosening …but last week it Failed in a hard way to work. China is the One that decided the “easy money” was being taken away. They have given so much stimulus since 2009.

  • panther341

    agree. neither CHina nor Russia (nor some others) want to trade oil in dollars. OPEC agreed to that 40 years ago but Russia is not OPEC.

  • panther341

    interest rates will affect housing market! I will be glad to get my house sold.

  • Trading_Nymph

    We talked about that a few weeks ago I think..bottomline nobody wants our debt, lol, ouch.

  • Trading_Nymph

    And without a need for dollars, China won’t have to buy as many dollars, ouch.

  • Trading_Nymph

    Panther, One thing I have learned for sure in all of this Bear Pain. Central Bank Action takes WEEKS/Months to be priced into the market. So this sell off should continue for awhile. AND the only reason why markets will stop and rally is over a Central Bank announcing easing. Problem is most Central Banks have hit limit. There is a Chinese Property Biz that will be in trouble on the 16th paying their debt, this will be the first test if China Govt will blink and throw out cash.

  • Trading_Nymph

    2533 was SPX’s 200 MA test. Algo T/A’s came in and bought, we are popping but should retest again pretty soon. They did that going up, they need to do that going down.