Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Peak China slams into Australian dollar

Published 18/07/2023, 11:19 am
Updated 09/07/2023, 08:32 pm

DXY remains soft and EUR on a tear:

DXY

However, AUD has rolled over anyway:

AUDUSD

China hit the Complex. Oil:

BRENT

Dirt:

COPPER

Miners (NYSE:RIO):

RIO

EM (NYSE:EEM):

EEM

Junk (NYSE:HYG):

HYG

US yields eased:

YIELDS

The bubble grew:

SPX

Peak China is here. As Nomura’s Lu Ting said yesterday:

…[stimulus] measures may not turn things around, due to weak confidence, negative sentiment, the huge fiscal cliff due to the collapse of land sales, clogged transmission channels, a shrinking tool box, slow decision-making on economic matters and conflicts among multiple targets. We believe markets should curb their expectations for a fast, cure-all package and instead embrace expectations of a growth slowdown towards below 4.0% in 2024.”

China is attempting to navigate its way through the “impossible trinity”. It is a fact that any nation can only control two of three variables in macro management: interest rates, currency value and capital flows.

China has chosen to sacrifice the property market in this endeavour. It is holding interest rates too high to engender any property recovery to protect the currency and sustain capital flows.

The issue is can China grow at all without property?

The answer is barely. 4% GDP is more like 1-2% when calculated properly.

This is not enough to hold youth unemployment down so political risks for the CCP further complicate the equation:

CNY Employment

This is Peak China unfolding before our very eyes. The CCP risks losing its legitimacy if it does not liberalise the economy much more aggressively to rebalance private ownership, consumption and services that soak up labour slack.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

But it can’t do it for fear of that very freedom.

If this continues, Xi may be forced to weaponise unemployment in an invasion of Taiwan to prevent revolution at home.

Anybody holding unhedged Chinese assets at this juncture is a complete idiot.

That includes the entire Australian economy and its currency.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.