China macro

Gosh the TSF China credit data didn’t look good.

That’s a negative number, there, for the first time in forever. Seasonality, a one-off, perhaps. It’s hard to believe it would have “sudden stopped” (even as we are generally negative on China’s macro backdrop in general).

M1 (the narrow measure of money) dropped to negative terratory, and other measures of money and credit all continue to trend lower.

China is also “possibly” considering a devaluation. Economic fundamentals are wobbly, and thus the strong appreciation of the RMB/CNY is hindering rather than helping (FX is usually the “equilibrating mechanism” in an economy, but China maintains a peg to the USD).

All of that should be broadly negative for commodities (and risky assets, in general, including equities). And yet, thus far, it doesn’t seem to be. China has been stockpiling many commodities (copper, iron ore) and buying up others (gold).

China is also relaxing a whole bunch of property constraints (how many houses you can buy, how much debt property developers can have) and so on, which is, all else equal, bullish, and is placing a bid under China equities and commodities in general (which rally on anticipated stimulus).

Clear as mud.

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