Did BOJ just saved the world ? …. For now …

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Illustration 1: Key Central Banks’ Balance Sheet as % of GDP … BOJ is the Champion and still going strong!

It was looking bleak in Asian markets in the morning with heightened geo-political tension overnight on the news of the U.S. missile defense system deployment to Guan that knocked S&P500 futures off its pedestal and KOSPI down 2% and looking to fall more precipitously.  China and Hong Kong markets were also closed for 清明节 (Qing Ming festival), the annual ”tomb sweeping” custom of praying to one’s deceased ancestors that can potentially usher in the ”Ting Hai (丁蟹) effect” too from 4 April 2012 onwards. http://tradehaven.me/2013/04/01/be-warned-the-ting-hai-%E4%B8%81%E8%9F%B9-effect-may-kick-in/.

But all that was to change with the ever ready-to-please his political masters, BOJ (Bank of Japan) Governor Kuroda when he delivered the QE (Quantitative Easing) manna from heaven at the conclusion of his two day BOJ policy meeting. http://uk.reuters.com/article/2013/04/04/uk-markets-forex-idUKBRE92L08Y20130404 

From above Illustration 1, BOJ is on a viagra inducing roll by increasing its balance sheet even further in both absolute and relative terms to Japan’s GDP.  We can see that the U.S. Federal Reserve has sort of reached a plateau in its QE ballooning of its balance sheet as % of U.S. GDP.  In fact, ECB (European Central Bank) and BOE (Bank of England) have both reduced their respective aggressiveness in QE where their % of GDP has turned and are actually heading lower since Q4 2012.

With the ECB policy meeting announcement due in a couple of hours, it will be interesting what ECB Chief, Trichet will deliver.  While Asianmacro do not expect a rate cut (Good Lord if he does and we will be in high heavens in bunds and DAX if he does that!), Trichet is likely to sound reassuring dovish in the statements and in putting some expectations of that out.  The key is to weaken the EUR (*return of beggar-thy-neighbour FX depreciation policy) as it will indirectly be a ‘devaluation’ option for the Club Med countries that are facing the economic stresses at the moment without the need for them to leave the EUR in going back to their Lira, Peseta, Franc etc.

While it does not change the bigger picture that I have presented in my previous post over the last 2 weeks, in the next hours – days, just be prepared for a short term liquidity boost expectations rally in stocks and for USD to continue to strengthen. Long USD & wear diamonds ! http://tradehaven.me/2013/03/14/beware-the-ides-of-march/

 

 

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

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Be warned ! …. the Ting Hai (丁蟹) effect may kick in

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*Saving General Yang — comes out on 4 April 2013

 

If you think that the weaker than expected China Manufacturing PMI (official figures or those of HSBC) released in Asian morning were the catalysts for the risk off move lower in Asian stocks and AUD FX …. wait till the ”Ting Hai (丁蟹) effect” kicks in if this time is no different from the past!

 

The person and event to watch is Adam Cheng Siu-chow.  Whenever Cheng’s films hit movie and TV screens, the Hang Seng index tends to collapse.  Cheng’s next movie — Saving General Yang — comes out on 4 April 2013.

 

Cheng had shows airing during the Asian financial crisis of 1998 and the tech bubble burst of 2000.  The market fell during 11 of 17 of his television shows since 1992.  It seems that the markets do worse when the series / shows are more tragic.  (*Do note that Saving General Yang is pretty gory and tragic!).

This phenomenon is called the ”Ting Hai (丁蟹) effect” http://en.wikipedia.org/wiki/Ting_Hai_effect named after one of Cheng’s characters who makes money by shorting derivatives and stocks.

 

Check out the unbelievable statistics of the market risk off downturn from Adam Cheng:

1990s

  • October 1992: The drama series Greed of Man made its debut on TVB. During the time it was broadcast, the Hong Kong’s Hang Seng Index dropped 598 to 600 points
  • November 1994: Instinct (笑看風雲) made its debut on TVB. The Heng Sang Index fell more than 2,000 points.
  • September 1996: Once Upon a Time in Shanghai (新上海灘) premiered on TVB. The Hang Seng Index fell 300 points.
  • June 1997: Cold Blood Warm Heart (天地男兒) made its debut on TVB. The Hang Seng Index accumulated 735 points in losses.
  • December 1997: Legend of Yung Ching (江湖奇俠傳) was followed by a fall of 1.4% in the Hang Seng Index.
  • June 1999, Lord of Imprisonment (神劍萬里追) was followed by a fall of 6.5% in the Hang Seng Index.

2000s

  • September 2000: A loose sequel of The Greed of ManDivine Retribution aired on ATV. Due to the Tech stock bubble at the time, the Hang Seng Index fell an accumulated 1,715 points, with other stock markets around the world falling as a result also.
  • March 2004: Blade Heart (血薦軒轅) premiered in Hong Kong, the Hang Seng Index fell 550 points over 3 days due to high oil prices and instabilities in the Middle East.
  • October 2004: The Conqueror’s Story (楚漢驕雄) premiered in Hong Kong, followed by a 198-point drop in the Heng Seng Index on the day of the premiere.
  • March 2005: The Prince’s Shadow (御用閒人) broadcast of the first episode, the Hang Seng dropped 100 points by noon, then rose back 90 points by the end of the day.
  • July 2007: Return Home (香港傳奇-榮歸) broadcast and the market to fell 1,165 points.
  • March 30, 2009: The King of Snooker (桌球天王) premiered in Hong Kong. The Heng Seng Index fell 663.17 points.

 

Asianmacro is not superstitious by nature and correlations does not infer causality. However if a sufficient number of people choose to believe in this mumbo jumbo ”Ting Hai (丁蟹) effect”, it might just become a self fulfilling prophecy and the markets de-risk and takes on a life of its own …..

 

 

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.