Wednesday, November 25, 2015

Huge Accounting Error

Here’s an accounting failure large enough to startle, but with little consequence in the end. Citic, one of the largest brokers in China, claimed more than 1 trillion yuan in over-the-counter derivatives it didn’t actually hold, in monthly financial reports this year. A regulatory body found the error, and Citic is in the process of filing amended reports. The story at Reuters:

The accounting error does not affect Citic’s financial results. Contracts were apparently double-counted after a technical change in a database. The timing of the error suggests that it could have been related to the stock market rout, though few details are available.

Monday, November 16, 2015

Reserve Currency Status Won’t Stop Yuan’s Slide

In two weeks the IMF is expected to vote to add the yuan as an international reserve currency, but this move is not likely to lend much short-term support to the Chinese currency. It is an awkward time for a fund manager to bet on the yuan, with authorities in China probably obliged to pursue inflationary policies for several years to support an overheated stock market and a flagging economy, with weakness in both domestic and overseas demand. Indeed, if there is a collapse in the yuan, the timing of the reserve currency vote could become an embarrassment to the IMF. A roundup from Nyshka Chandran at CNBC:

Friday, November 13, 2015

With Stock Recovery, IPO Ban Lifted

The Chinese stock market has had an impressive run this month, enough for regulators to lift the ban on IPOs. The high stock prices, now more than 50 percent above the levels suggested by the values of the underlying businesses, cause increased concern about a stock market crash.

Wednesday, November 11, 2015

U.S. Consumers Forget to Go Shopping

A buildup in U.S. retail inventory sheds a new light on the departure from seasonality this year in shipments from China to the United States. The holiday-season peak arrived two months early. It’s possible that orders were placed early as retailers and wholesalers remembered the U.S. West Coast port delays of a year ago. However, it now looks highly likely that retailers simply had less money to spend as the year wore on, having overbought earlier expecting a shopping boost that still hasn’t arrived. The late holiday-season orders, then, could have been scaled back or canceled as retailers lowered their expectations for the season at the same time that they cut their budgets.

If it turns out to be true that consumers are “forgetting” to go shopping, that will represent a new and unexpected dimension in consumer behavior that will have to be factored into future planning at retail and in economic policy.

Monday, November 9, 2015

Global Recession Fears As Trade Slows

While not quite predicting a global recession, OECD points out that current trends in global trade have never occurred without a recession following within the next year. Market analysts are picking up on this risk. A summary of the economic modeling and reaction at CNNMoney:

This is a different situation that seen in the past, but mere fears of a recession can cause a recession to come about. Will that happen this time?

Sunday, November 8, 2015

Exports Tumble

Exports from China are declining more rapidly than expected, reflecting a weak global demand for manufactured goods. In the latest official monthly report, imports declined even faster, giving China its largest monthly trade surplus ever. A summary from Bloomberg at The Straits Times:

Exports declined 6.9 percent compared to the year before. The figures suggest that earlier holiday-season orders this year from North America and Europe may have propped up last month’s manufacturing, which already showed a decline of 3.7 percent from the year before.

Other countries are also showing declines in industrial output, though global purchases of manufactured goods seem to be growing ever so slightly.

Monday, November 2, 2015

More Measures from Asia, U.S.

Economic measures and anecdotes continue to point to a global manufacturing slowdown, though it still doesn’t look like anything sudden. At International Business Times, factory activity is soft across East Asia, with some analysts looking at global demand and commodities and others looking at the manufacturing slowdown in China as the cause:

In the United States, the ISM PMI fell to 50.1, indicating a barely measurable expansion in manufacturing in October. Details at