China’s market boom getting stretched. By the time you read this, there could have been a rebound in the Chinese sharemarkets in Shanghai and Shenzhen, but if there is, don’t be fooled. While there’s been a huge boom (Shanghai is up 50% this year, Shenzhen by even more), it is creaking and the big falls yesterday tell us there could soon be a sudden snap. The Shanghai market fell 6.5% yesterday and Shenzhen 5.5%, and the nervousness spread to Hong Kong, where there was a sell-off in Chinese shares and the Hang Seng index fell 2.2%. The key trigger was news that an investment arm of China’s wealth fund had shocked investors by selling around US$500 million worth of charges in the country’s two biggest banks. Media reports said the filings to Hong Kong Exchanges & Clearing showed that China Central Huijin sold 300 million Shanghai-listed shares of Industrial and Commercial Bank of China Ltd. (ICBC) and 280 million Shanghai-listed shares of China Construction Bank Corporation on Tuesday, for a combined amount of over 3.5 billion yuan (US$560 million). These were not large holdings, but they were very symbolic — the first such sales and coming at a time when the markets are in something resembling a bubble, with confidence fragile. — Glenn Dyer
Round up the usual suspects. No it’s not Casablanca, it’s the FIFA arrests in Zurich and the American plods chasing down the bad guys of world soccer. And guess who’s in the middle, and providing the reason why the Yanks have swooped? Why its our old friends, the dodgy banking gang, fresh from rorting forex rates, and myriad other scandals. There’s a familiar roll call of banking involvement in the FIFA corruption scandal. Here’s the list of banks mentioned in the US Justice Department documentation: JPMorgan Chase, Citigroup, HSBC , Bank of America, UBS and Julius Baer. A key role in these transactions, according to the documents, was the small Delta National Bank and Trust in Miami (playing with the big lads now). Of course, JPMorgan Chase, Citigroup, UBS, Bank of America were up to their necks in forex and Libor rorting and other atrocities. HSBC has been done for money laundering and sanctions busting and a bit of this and a bit of that. And remember some of these banks have agreed to guilty verdicts in settlements with US authorities, but give waivers by the Securities and Exchange Commission, which allows them to remain in business, taking people’s money, managing it, losing it, making profits, paying bonuses, dividends and being too big to fail and too big to jail. — Glenn Dyer
Myer’s HQ special. Myer is going down a familiar route after a change of leadership — the retailer yesterday axed the jobs of 80 people from head office as the review by new CEO Richard Umbers continues. Fairfax Media says around 1000 people are employed at Myer’s Melbourne head office and thousands more are employed in the stores. The real guts of the review won’t come for a while — late this year is the best information so far — but when it does it won’t be pretty with stores being closed and hundreds of jobs lost. But not on the board. — Glenn Dyer
Sensible Janet Yellen. The second estimate of US first-quarter GDP is out tonight (10.30) and is likely to show economic growth fell in the three months to March, with estimates of a fall of up to 0.9% (annual) out in the market. But ignore that reading and any market reaction and commentary about how that could see the Fed postpone a rate rise. It won’t — there will be a rate rise this year (the GDP figure is probably wrong anyway at the moment because of problems with the way certain parts of the data is seasonally adjusted). Instead keep an eye on Fed chair Janet Yellen. She will not attend this year’s big economic conflab at Jackson Hole, in Wyoming, in August. No reason has been given. In previous years, the then Fed chair has used the conference as a platform to make major monetary-policy addresses. She will be at the June meeting of the Fed’s Open Markets Committee on the 16th and 17th of next month, which will have the latest Fed forecasts for the US economy and the now famous “dot graph”, which shows where committee members think interest rates will be and how high over the next year or so. June’s dot graph could become a self-fulfilling prophecy if rates rise from the September meeting onwards.
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