China slowdown reflected in resource sector in Australia - one word .... disaster ! Gold demand for physical quadruples since April meltdown ! Abenomics crushes South Korean exports - how long before South Korean devalues its currency ?

http://www.zerohedge.com/news/2013-06-02/down-and-out-down-under

Down And Out In Down Under

Submitted by Tyler Durden on 06/02/2013 10:41 -0400

• Australia
 
• China
 
• Germany
 
• Hong Kong
 
• Japan
 
• None
• Private Equity
 
• United Kingdom

For all the talk China's economic problems are getting (and yes, its official PMI came just slightly ahead of expectations on Saturday printing at 50.8 with consensus looking for 50.0: after all the Politburo can't give the impression of an out of control stall), the real action continues to unfold in its primary derivative economy, that of Australia, and particularly its "China-feeder" resource space, which is a far more accurate indicator of the true demand picture in China than manipulated data out of Beijing.  What is going on there, for those who have not been paying attention, is in one word, a disaster.

CLSA's Damien Kestel summarizes, "As noted in recent weeks it has been happy days for investors enjoying the highs on the S&P 500 and associated rallies across Germany, the UK, Japan and elsewhere. But that joy is a world away from the pain that has been inflicted on the majority of resource related equities and their investors. The AS39 Index on Bloomberg includes 87 mid and (now) small cap Australian resource companies. It has been smashed – just like many of its constituents. From early 2011 it has fallen >65% to now sit at GFC levels while there are plenty of examples of stocks that not so long ago had mkt caps of $800m that are now $50m. The evidence of pain in the resources space is everywhere but probably none more so than in Western Australia, the “engine room of Australia”.

Kestel goes on to compile a page of quotes from "conversations over the past week with friends and associates in the Perth mining game and it brought back memories of the Asian Crisis, Tech bust and of course the GFC."

• “We’re seeing a much sharper contraction in the Australian economy than we’d anticipated four or five months ago”.Coffey MD, John Douglas. The engineering group has seen its shares, which traded above $4 in 2007, hit 10c last week.
   
• “We’ve still got a lot of construction under way or committed and there’s a lot of activity that will go on for the next three years or so. I think where the question mark comes in my mind is, well, what will follow those projects?”. Western Australia’s Premier, Colin Barnett
   
• “Perth has the highest population per capita of self made millionaires in the world”. Extract from a list of fun facts on Western Australia. I dare say there are a few less after the recent carnage in mining stocks.
   
• “The current feeling on St George’s Terrace (Perth’s main business street) amongst brokers and miners is that today is worse than the GFC ever was. It’s 100% pain out there” Perth mining investor
   
• “I was at the Mines and Money conference in Hong Kong recently. They should really call it Mines and No-Money because no one has any and no one wants to give it to them” Mining CEO
   
• “By 10am, the Fitness First gym in the city is packed full of brokers who’ve had a gutful of sitting at their desk doing nothing – salary cuts are starting and next it will be jobs” Perth broker
   
• “Oh mate, the funding market is dead. You are now seeing a few deeply discounted rights issues for those that are reaching desperate levels ….. liquidity has completely disappeared” Perth broker
   
• “Private equity firms are gearing up for a multi-billion-dollar push into the mining sector, with a wave of proposed asset sales by the big miners, a shortage of competing buyers and the funding headaches faced by smaller companies paving the way for a rise in deals”. The Australian

So, bargain-basement purchasing opportunity, or just the beginning of a secular shift and much more pain to come, as the China "paradigm" finally cracks?




http://www.zerohedge.com/news/2013-06-02/chinas-demand-physical-quadruples-gold-premium

China's Demand For Physical Quadruples Gold Premium

Submitted by Tyler Durden on 06/02/2013 16:24 -0400

• China

The premium that gold buyers in China pay to take immediate delivery of bullion has jumped four-fold in the last six weeks following the gold price 'crash'. As Bloomberg notes, even before the mid-April drop, China's gold imports jumped to a record in the first quarter as domestic demand (776 tons) outweighed domestic supply (403 tons). Images of consumers overwhelming jewelry shops were everywhere but the following chart clarifies just what the suspected gold manipulation did for demand as China's gold premium, while admittedly noisy, jumped from a long-run average of around $7 to over $32! As one analyst notes, the gold "premium is a function of demand and supply, and right now you could interpret the high premium in Shanghai as a sweetener to entice the overseas gold supply to flow into China."

Source: Bloomberg Chart of the Day

Meanwhile Abenomics hist South Korea - which is now calling for an international Response !


http://www.zerohedge.com/news/2013-06-02/south-korea-demands-international-action-against-negative-impact-abenomics

South Korea Demands "International Action" Against "Negative Impact" Of Abenomics

Submitted by Tyler Durden on 06/02/2013 11:37 -0400

• Bond
 
• Carry Trade
 
• Fail
 
• Germany
 
• Global Economy
• Goldman Sachs
 
• goldman sachs
 
• Great Depression
 
• Gross Domestic Product
 
• International Monetary Fund
 
• Ireland
• Japan
 
• Monetary Policy
 
• Trade Balance
 
• Trade Wars
 
• Yen

Over three months ago in "South Korea Starts Currency War Rumblings; Has Japan In Its Sights" we showed that the one nation with the biggest sensitivity to Japan's currency-destructive and export-promoting Abenomics policy is its close neighbor, South Korea. With nearly 60% of SK's entire GDP deriving from net exports, every percent drop in its trade balance result in a more than 0.5% hit to GDP: more than any nation in the world. And since South Korea and Japan compete for the same export end markets, there would be no bigger loser in a zero trade sum world than Seoul.

We said as much back then: "all eyes now turn to Seoul in anticipation when this final bastion of monetary stability will cave to the global onslaught and its central bank proceeds to engage Japan directly in the most acute case of global currency warfare since the Great Depression. However, as C-grade financial tabloids have explained, the currency wars, and trade wars that result, will be a win-win for everyone.... Just please to ignore the last time they resulted in war-war."

The immediate result were three months of relative silence as South Korea bit its tongue and suffered export pain, while following the broader G-7/8/20/IMF script, which ignored the actual impact of Abenomics on global trade, and was perfectly happy to "let it be" as long as the global liquidity tsunami out of Kuroda resulted in a surge in global stock markets (after all, must preserve confidence in the global Ponzi at all costs, as has happened) and as local banks scrambled to engage in an unprecedented bond carry trade also pushing European peripheral yields to record lows in some cases (in the process masking Europe's insurmountable problems even more).

However now that Abenomics is in its sixth month, and South Korea's max export pain threshold has been reached, the country no longer will stay silent. As the FT reports, "South Korea has warned that G8 leaders need to do more to tackle the “unintended consequences” of Japan’s monetary easing when they gather for a summit later this month amid mounting concerns about the knock-on effects of a weaker yen. In an interview, Hyun Oh-seok, the South Korean finance minister and deputy prime minister, said that international co-ordinated action was needed to mitigate the impact of so-called “Abenomics” on currency markets."

The weaker yen had begun to hurt South Korean exports, Mr Hyun said, and is having unforeseen spill over effects on the global economy.

“The point is that these monetary policies are having quite a negative impact,” Mr Hyun told the Financial Times.

What is ironic is that it was international coordinated action that allowed Abenomics to develop in the first place, and by doing so it alienated and explicitly damaged South Korea's trade status quo. What is more ironic is that it is finally dawning on South Korea that the "international community" has de facto sacrificed SK's long-term economic prospects to the immediate benefit of rising global stock and bond markets, which are the direct result of Kuroda's $75 billion in month liquidity injections.

In other words, Mr. Hyun has realized he is all alone, and that the international community will do nothing to change a new path, one in which Japan's economy now has no way but to see it through its sad ending, because should Abenomic fail now, this will be it for any future reflation (read reserve injection) attempts by a Goldman Sachs think-tanked BOJ. It will be up to South Korea to act accordingly, which in a world where every nation is now engaged in currency wars means only one thing: destroying the Korean Won.

Of course, diplomacy must fail first:

The G8, he said, needed to come up with ways to address the issue at its summit later this month in Northern Ireland.

“We need some kind of co-ordinated efforts to prevent these kinds of unintended side effects from [Japan’s new] monetary policy,” he said. “Whether it is intended or not, the result [of the depreciation of the Japanese yen] is quite quick.”

The impact on South Korea has been particularly acute because most of its top 10 exports compete directly with Japan. But he said similar concerns were shared by Germany.

He is looking at an uphill climb: the G-8 already made it very clear that as long as Abenomics results in rising stock markets, it won't lift a finger.

G8 leaders and finance ministers have so far stopped short of publicly criticising the moves, believing that the resumption of faster economic growth in Japan would be a greater good for the global economy and overshadow any concerns over the impact of currency swings on the country’s trading rivals.

Keen to defuse fears over the revival of what have in the past been called “the currency wars”, the G8 and G20 have both issued statements this year saying countries should target domestic growth rather than exchange rates with monetary policy. Japan insists it is doing exactly that.

Implicitly, the G-8/20 also thinks everyone else in the world is an idiot. But all this will be irrelevant if one more major export powerhouse joins alongside South Korea in formally lodging complaints. Someone like Germany. Because if Merkel also says that the 200 or so boost to the S&P is more than enough to offset marginal losses in German exports, then Abenomics may very well be on its way out.

What this means for USDJPY, already a tiny 40 pips from plummeting once the 100.000 stops are taken out, and which may well happen tonight once Mrs Watanabe wakes up and sees the carnage from Friday's closing US print, will be made very clear shortly. It also means that anyone long the Korean Won should probably be getting quite nervous right about now.