The Market Ear with the juice on capital flight from China.
Selling China
The CSI 300 broke below big supports and is now trading at the lowest levels since March 2020. Second chart shows the huge selling of Chinese equities leading up to today. It didn’t improve today….
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GS PB
KWEBed
Things aren’t good when the tech ETF (KWEB) looks like a small cap stock having profit warned…RSI is at the lowest levels since the March puke.
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Fallen tech giants
1 year chart of BABA, JD, Tencent and Meituan.
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The world’s crashed tech
You know things are bad when NASDAQ looks like a great tech long on a relative basis. The epic crash of Chinese tech continues and the HSTECH printed lowest levels in forever (again). Many smart guys have this as a great long, but obviously nobody has a clue. The only thing that matters is managing your P/L. Now go check out chart two to remind yourself why you should never let draw downs get out of control.
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TME
Emerging market – emerging for a reason
EEM is full of Chinese tech these days and the EEM/SPY ratio is collapsing again. Second chart shows VXEEM overtaking VIX, at least some relative rationality is coming back to markets.
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Who says volatility doesn’t trend?
Over time volatility is mean reverting, but when things go out of control, you can see volatility rise in tandem with the imploding asset for long periods of time. Yuan 1 month volatility is printing new recent highs, trading at the highest levels since 2016, close to all time highs (chart 2).
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Yuan watch
It used to be a part of the narrative…These days it is not that powerful, but watch it closely…
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Critical minerals needed
Growing tensions and military build up in East Asia “…increases the risks for US-China bilateral trade and the global economy” writes TS Lombard.
TS Lombard
Tech war’s geopolitical tail risks
TS Lombard on the next phase of the US/China tech war:
1. US ‘success’: Denied TSMC’s most advanced chips, Beijing may ultimately decide there is little left to lose in sparing Taiwan (hence) TSMC from attack. An ominous parallel is the US oil blockade of Japan in 1940: faster decoupling reduces the cost to the Chinese economy from military adventures. Perhaps most worrisome of all, military action could provide a potent substitute for the CCP’s legitimacy in the face of China’s declining economic growth by rallying nationalists to the flag.
2. ‘China ‘success’: the path to the relatively benign outcome of “competitive co-existence” in a now fully-fledged bipolar world order would be fraught with major scares and confrontations analogous to the way that the original Cold War was only stabilized after the brush with mutual annihilation in the Cuban missile crisis exactly 60 years ago.
Bottom line seems to be fatter tails…
TS Lombard
