Chinese Financial Market Monitor

This a demo dashboard which shows a handful of charts on Chinese financial conditions.  

As we build this out, we will be adding many more elements to help build out our picture of China.  

For the time being, we have left it at these three visualizations as a way of calling out some interesting dynamics we are observing.


General financial conditions in China are tightening.  Funding conditions for governments and banks have increased.  Interesting how much more volatile the off-shore interbank market is than the onshore....

Bank equities in China provide some window into what's happening in the credit pipes. Bank stocks are reasonably healthy, in spite of the deterioration in credit conditions.

Interesting how correlated bank stocks are among the Big 5 national banks, while meaningful dispersion exists among the JSC and City Commercial Banks.  

Stepping back, we intend to track the conditions for critical industries.  For tracking real estate, REIT stocks and steel/iron prices have thusfar been relatively representational.  We are planning to add a host of real estate and industrial indicators here in the coming days and weeks. 

The PBoC has been active in FX markets.  Strengthening the RMB in spot markets...though against a long trend of weaker yuan.  Along with RMB strength, FX vols have sold off, though still higher than before the first deval in August 2015.

 

Though off-shore funding markets have been acting up...

FX vols have sold off, though still higher than before the first deval in August 2015.

Tightening by the Fed in June would put additional pressure on the PBoC...

We are tracking indicators of economic activity in China.  PMIs usually convey information as to the conditions in the corporate sector, but official stats (the blue and white lines) have had much less volatility (since the crisis) than one would expect given the swings in credit conditions and economic activity in China experienced by corporations.

So while we remain somewhat skeptical of PMIs as accurate representations of conditions, it does appear that the explosion in credit has supported Chinese industry through what was a difficult time in late 2015-early 2016. 

 

Steel PMI.jpg

Looking at the raw, unadjusted credit creation numbers for China is interesting.  Not least for the inherent volatility (and the interesting observation of the annual January surge, potentially in reaction to domestic liquidity tightness from outflows), but also the simple reminder that credit is still being created at a furious pace.

Amidst this backdrop, the rampant run up in real estate prices may have stalled...      

Amidst this backdrop, the rampant run up in real estate prices may have stalled...