Traders build largest short position on Emerging Market Dollar Bonds in more than a decade pic.twitter.com/U9o9M39LYF
— Win Smart, CFA (@WinfieldSmart) April 10, 2024
The recent financial tremors emanating from China have sent shockwaves through global markets. Traders are exhibiting unprecedented caution, as evidenced by the largest short position on Emerging Market Dollar Bonds in over a decade. But what’s behind this sudden surge in risk aversion?
Firstly, the abrupt and dramatic plunge of a Chinese Cement Maker’s stock, wiping out nearly $1.8 billion in market capitalization, serves as a stark reminder of the volatility lurking within China’s markets. This event, coupled with the revelation that 70% of the stock was controlled by a single shareholder and their spouse, underscores the concentration of risk inherent in some of China’s corporate structures.
Furthermore, China’s ongoing struggle with its currency, the CNY, adds fuel to the fire. Despite efforts by the People’s Bank of China (PBOC) to stabilize the exchange rate, the currency continues to falter, signaling deeper underlying issues within the economy.
Adding to the woes, Fitch’s decision to downgrade China’s credit rating to Negative further amplifies concerns about the country’s economic trajectory. With China’s government debt expected to breach the ominous 100% mark of GDP by 2027, the outlook appears increasingly bleak.
Chinese Cement Maker Stock plunges 99% within minutes, wiping out almost $1.8 billion in market capitalization. The stock was 70% owned by a single controlling shareholder and their spouse pic.twitter.com/a6Gek3DPjN
— Win Smart, CFA (@WinfieldSmart) April 10, 2024
China still struggling mightily w/CNY. After two days, the PBOC has fixed slightly weaker and despite commercial banks doing their part the exchange value was lower today than yesterday. https://t.co/Fd4waNX2oh pic.twitter.com/TnD0qGeeNT
— Jeffrey P. Snider (@JeffSnider_EDU) April 10, 2024
BREAKING 🚨: China
Fitch cuts China's credit rating to Negative pic.twitter.com/Au6a66kRFh
— Barchart (@Barchart) April 10, 2024
China's government debt to GDP is expected to cross the 100% mark in 2027
Which is telling as to why Fitch revised China’s outlook to negative…@business pic.twitter.com/qENn9G3tM2
— Longview Economics (@Lvieweconomics) April 10, 2024