Sunday, March 9, 2014

Asia round up March 9 , 2014 -- Rumblings from Two major Asia Economies -- Abenomics Crucified With Lowest GDP Since Abe, Worst Current Account Deficit On Record ........ Chinese Exports Collapse Leading To 2nd Largest Trade Deficit On Record ...... How can Europe and the US expect a recovery if China and Japan economies are collapsing ?

http://www.zerohedge.com/news/2014-03-09/abenomics-crucified-lowest-gdp-abe-worst-current-account-deficit-record


Abenomics Crucified With Lowest GDP Since Abe, Worst Current Account Deficit On Record

Tyler Durden's picture






"It's the weather" That's all Abe has left to pretend that 'recovery' is right around the corner. Japan just printed its worst current account deficit on record and its worst GDP growth since Abenomics was unveiled - both missing by the proverbial garden mile and both confirming that all is not well in Asia. As for the perpetual hope of a J-curve (or miracle hockey-stick reversal)? There won't be one! As Patrick Barron noted, "monetary debasement does not result in an economic recovery, because no nation can force another to pay for its recovery." 

Worst current account deficit ever - and a chart that shows absolutely no hope of a turn anytime soon...

and the worst GDP growth since Abenomics was unveiled and 2nd quarter missed in a row...


Perhaps I can shed some light on Japanese Prime Minister Abe’s missing J-curve; i.e.,why Japan’s trade deficit seems to be increasing rather than decreasing after massive monetary intervention to reduce the purchasing power of the yenMonetary debasement does NOT result in an economic recovery, because no nation can force another to pay for its recovery.

Monetary debasement transfers wealth within an economy by subsidizing exports at the expense of the entire economy, but this effect is delayed as the new money works it way from first receivers of the new money to later receivers. The BOJ gives more yen to buyers using dollars, euros, and other currencies, as the article states, but this is nothing more than a gift to foreigners that is funneled through exporters. Because exporters are the first receivers of the new money, they buy resources at existing prices and make large profits. As most have noted, exporters have seen a surge in their share prices, but this is exactly what one should expect when government taxes all to give to the few.

Eventually the monetary debasement raises all costs and this initial benefit to exporters vanishes. Then the country is left with a depleted capital base and a higher price level. What a great policy!

The good news is that Japan does know how to rebuild its economy. It did it the old-fashioned way seventy years ago–hard work and savings.

The result of all this total and utter disaster for the Japanese economy - a melt-up in JPY crosses (i.e. JPY weakness with USDJPY back over 103) supporting US equity futures into the green... because what do you do when Chinese credit markets are collapsing, the Japanese economy is imploding, and the fate of Germany (and therefore Europe's) economy lies with Russia... you BTFATH...





Celebrating China's First Bond Default: Copper Limit Down, Yuan Crashes Most In Six Years

Tyler Durden's picture





 
It would appear the fecal matter is starting to come into contact with the rotating object in China. Worrying headlines are beginning to mount on the back of real economic events (an actual default and a collapse in exports):
  • *COPPER IN SHANGHAI FALLS BY 5% DAILY LIMIT TO 46,670 YUAN A TON
  • *CHINA YUAN WEAKENS 0.46% TO 6.1564 VS U.S. DOLLAR
  • *YUAN DROPS MOST SINCE 2008
Aside from that Iron ore prices are crumbling, Asian stocks are dropping, Chinese corporate bond prices aee falling at their fastest pace in almost 4 months, and all this as 7-day repo drops to one-year lows (as banks hoard liquidity).

Item #1: The forced unwind of massive rehypothecated copper lots related to concerns over shadow-banking defaults sparked by the fact that Chaori was allowed to actually default...

Pushing Shanghai copper limit down...

Item #2: Iron Ore prices collapsing for similar reasons (as borrowers rotated to Steel and by-products for collateral on their shadow bank lending facilities)...

Item #3: Corporate bond prices are dropping at their fastest in 4 months...

Item #4: Repo rates are at near-record lows as banks hoard liquidity...

Item #5: USDCNY is tumbling as PBOC efforts to unwind the massvley one-sided carry trade appear to be getting out of control...

Item #6: AsiaPac stocks are down by their most in almost 6 weeks...

Item #7: Even US equity futures are unhappy (with JPY carry having caught up and now dumping again)...

Bonus Item: Copper-to-Gold ratios are collapsing...

Charts: Bloomberg













http://www.zerohedge.com/news/2014-03-07/chinese-exports-collapse-leading-2nd-largest-trade-deficit-record



Chinese Exports Collapse Leading To 2nd Largest Trade Deficit On Record

Tyler Durden's picture






Plenty of excuses out there for this evening's colossal miss in Chinese exports (-18.1% YoY vs an expectation of a 7.5% rise) mainly based on timing issues over the Lunar New Year (but didn't the 45 economists who forecast this data know the dates before they forecast?) This is a6-sigma miss and plunges China's trade balance to its biggest miss on record and 2nd largest deficit on record. Combining Jan and Feb data (i.e. smoothing over the holiday), exports are still down 1.6% YoY - not good for the much-heralded global recovery. Exports to the rest of the BRICs were all down over 20% but no there is no contagion from an emerging market crisis.

Even when the trade deficit was last this large, economists were more accurate - this is the biggest miss on record...

Seasonally-adjusted the data is stunningly bad...
  • *CHINA FEB. SEASONALLY ADJUSTED EXPORTS FALL 34% MOM
  • *CHINA FEB. SEASONALLY ADJUSTED IMPORTS FALL 0.4% MOM
and non-seaonally-adjusted
  • *CHINA'S FEB. EXPORTS FALL 18.1% FROM YEAR EARLIER (vs +7.5% expectations)
The excuse...
"The Spring Festival factor caused sharp fluctuations in the monthly growth rate as well as the monthly deficit," Customs said in a statement accompanying the data.

Chinese traders followed their "business habit" of bringing forward exports ahead of the holiday, and focusing on imports immediately afterwards, it added.
But, our simple question is - didn't they already know this when applying their forecasts? If so - then why a 6-standard-deviation miss?
At least they didn't blame the weather?!!
It seems the massive imports of copper - to act as collateral for all the shadow banking loans - also did not help as imports surged...
*CHINA JAN.-FEB. COPPER, PRODUCT IMPORTS 915,000 TONS

All that apparent demand and yet the price is collapsing - not good for the credit unwind
And what does it say about the US that our trade balance with China collapsed MoM...