World stocks rally on China measures, earnings
Source: AP-Excite
By KELVIN CHAN
HONG KONG (AP) — World stock markets rallied Tuesday, boosted by investor optimism over recent stimulus efforts, market reform measures in China and quarterly earnings from U.S. and European companies.
KEEPING SCORE: European stocks mostly rose in early trading, with Germany's DAX up 0.4 percent to 11,944.34. Benchmarks in London and Paris drifted lower while other markets mainly posted moderate gains. U.S. stocks were poised to open higher, with Dow futures up 0.5 percent to 18,037.00. Broader S&P 500 futures climbed 0.5 percent to 2,102.10.
ASIA'S DAY: Hong Kong's Hang Seng led a surge in Asian markets, jumping 2.8 percent to close at 27,850.49. The Shanghai Composite Index in mainland China added 1.8 percent to 4,293.62. Japan's Nikkei 225 gained 1.4 percent to 19,909.09 while South Korea's Kospi was down 0.1 percent at 2,144.79. Australia's S&P/ASX 200 climbed 0.7 percent to 5,872.30.
HK BOUNCE: Hong Kong stocks rebounded strongly as investors shook off initial pessimism over mainland Chinese regulatory changes for stock investors and monetary loosening announced on the weekend. Mainland investors seeking attractively priced stocks have been piling into the Hong Kong market, which has underperformed compared with Shanghai over the past year. On Sunday the central bank slashed the required reserve ratio for banks by 1 percentage point to stimulate lending into a slowing economy. Separately, the country's stock regulator said Saturday that new measures to tighten up on some margin financing and encourage short selling were intended to prevent the market's development and not meant as a crackdown.
FULL story at link.
Women look at an electronic stock indicator of a securities firm in Tokyo, Tuesday, April 21, 2015 as Japan's Nikkei 225 gained 274.60 points, or 1.4 percent to finish at 19,909.09. Hong Kong led Asian stocks higher Tuesday as investors shook off initial pessimism over new measures by China's market regulator. (AP Photo/Shizuo Kambayashi)
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Once you start a fiat (Ponzi) central banking system you go all in, or you don't go. No matter how many fake things one has to do in order to assure a semblance of normality. You can never stop what you're doing once you start. It usually gets worse (e.g. see- U.S. Economy), but nevertheless it has to run it's own course.
- Unfortunately that course usually runs from the top, downhill. And over people such as we........
Submitted by Tyler Durden on 04/19/2015 22:40 -0400
A little over a month ago we suggested that QE in China may take the form of local government debt purchases by the PBoC. As a reminder, China is allowing local governments to refinance a portion of their ~17 trillion yuan debt pile by swapping it for lower yielding bonds. As a percentage of GDP, local government debt has grown to 35% and because a sizeable amount was accumulated off balance sheet via shadow banking channels, it carries relatively high interest rates.
The pilot program will allow for the refinancing of around 1 trillion of that debt, a move which could save local governments some 50 billion yuan in interest payments. As a reminder, here’s what the local government debt picture looks like in China:
The problem with the scheme however, is that the banks who purchase the newly issued local government bonds will have that much less cash to lend at a time when the central bank is keen to keep liquidity flowing and as we’ve seen over the past several months, several factors are conspiring to undercut or otherwise limit the effectiveness of interest rate and RRR cuts. Essentially, China is caught between a peg to the strong dollar, decelerating economic growth, and capital outflows, meaning that devaluation to bolster flagging exports risks aggravating capital flight while not devaluing gets more costly by the quarter. It’s this currency conundrum that has led us to predict that in the end, China will resort to QE.
Given the new refinancing progam, it seemed logical to suggest that if China wanted to integrate QE into its current efforts to assist local governments with their debt load, the central bank could simply buy the local government debt. Here’s what we said last month: “It seems as though one way to address the issue would be for the PBoC to simply purchase a portion of the local debt pile and we wonder if indeed this will ultimately be the form that QE will take in China.” As the WSJ reports, China may do just that, although the program, should it become a reality, will still be one step away from outright QE: MORE
K&R
