Post by account_disabled on Feb 27, 2024 6:07:45 GMT -5
Property prices are falling. The big real estate developers are in a desperate situation. A large financial conglomerate has not paid interest on products sold to investors. For many investors, such recent events in the country seem like a remake of a 2008 movie that few enjoyed. The gloomiest predict the implosion unfolding in the Chinese economy, with years of over-construction, white elephant projects and unproductive infrastructure spending finally coming home. Given that a systemic crisis in China would reverberate around the world, this has raised alarm and triggered calls for Beijing to intervene more forcefully to revive the Chinese economy. The curious thing, however, is that this pessimism is not reflected in what the market is signaling. Let me start with the performance of the banks. In most financial crises, banks' stock price performance begins to signal trouble months before a systemic crisis develops. For example, the S&P Composite 1500 banking index fell 66 percent between January 2007 and July 15, 2008 before Lehman Brothers collapsed in September of that year.
Similarly, European banks, as measured by the MSCI EMU banking index, lost 35.4 percent between January 1, 2010 and August 1, 2011, before sovereign bond yields in the periphery of the eurozone began to skyrocket, unleashing Jordan Mobile Number List the euro crisis. You are viewing a snapshot of an interactive chart. This is most likely because you are not logged in or JavaScript is disabled in your browser. With this in mind, over the past 12 months, Chinese bank shares (as measured by the FTSE China A-Share Banking Index) have actually gained 2.4 percent (excluding dividends). This means that, over that period, Chinese banks have actually outperformed US banks by 12.6 percent in dollar terms. So what do you call a systemic emerging market financial crisis in which local banks have made annual gains and outperform US banks by double digits? In reality, there are only two possible answers: unprecedented or non-existent. Here's something else that's unprecedented in an emerging-market financial crisis: the huge outperformance of Chinese government bonds relative to U.S. Treasuries, considered a traditional safe-haven investment.
Until the Covid-19 lockdowns, yields on Chinese government bonds and US Treasuries were roughly the same over any significant time period. But evidently, in the case of Covid, very different policy options were implemented in both China (longer lockdowns) and the United States (extreme fiscal stimulus and expansion of central bank balance sheets). Consequently, since January 1, 2020, long-term Chinese government bonds (as measured by BAML indices) have returned 17.1 percent, while long-term US Treasuries have returned negative returns. of 13.4 percent. Going back to our previous question: What do you call a systemic emerging market financial crisis in which local government bonds outperform US Treasuries by more than 30 percentage points in less than three years? Unpublished or non-existent. Iron ore line chart, future, SGX TSI China Iron Ore index*, January 2024, dollars per metric ton showing that iron ore prices, which are highly sensitive to China, have recovered Of course, one can choose to ignore the messages coming out of Chinese stock markets (which, although disappointing this year, have yet to break their October 31, 2022 lows), government bonds move, or even currencies move as Beijing's hand on prices could easily distort signals.
Similarly, European banks, as measured by the MSCI EMU banking index, lost 35.4 percent between January 1, 2010 and August 1, 2011, before sovereign bond yields in the periphery of the eurozone began to skyrocket, unleashing Jordan Mobile Number List the euro crisis. You are viewing a snapshot of an interactive chart. This is most likely because you are not logged in or JavaScript is disabled in your browser. With this in mind, over the past 12 months, Chinese bank shares (as measured by the FTSE China A-Share Banking Index) have actually gained 2.4 percent (excluding dividends). This means that, over that period, Chinese banks have actually outperformed US banks by 12.6 percent in dollar terms. So what do you call a systemic emerging market financial crisis in which local banks have made annual gains and outperform US banks by double digits? In reality, there are only two possible answers: unprecedented or non-existent. Here's something else that's unprecedented in an emerging-market financial crisis: the huge outperformance of Chinese government bonds relative to U.S. Treasuries, considered a traditional safe-haven investment.
Until the Covid-19 lockdowns, yields on Chinese government bonds and US Treasuries were roughly the same over any significant time period. But evidently, in the case of Covid, very different policy options were implemented in both China (longer lockdowns) and the United States (extreme fiscal stimulus and expansion of central bank balance sheets). Consequently, since January 1, 2020, long-term Chinese government bonds (as measured by BAML indices) have returned 17.1 percent, while long-term US Treasuries have returned negative returns. of 13.4 percent. Going back to our previous question: What do you call a systemic emerging market financial crisis in which local government bonds outperform US Treasuries by more than 30 percentage points in less than three years? Unpublished or non-existent. Iron ore line chart, future, SGX TSI China Iron Ore index*, January 2024, dollars per metric ton showing that iron ore prices, which are highly sensitive to China, have recovered Of course, one can choose to ignore the messages coming out of Chinese stock markets (which, although disappointing this year, have yet to break their October 31, 2022 lows), government bonds move, or even currencies move as Beijing's hand on prices could easily distort signals.