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28 Jan 2014
Flash: Sell AUD on China credit crisis - JPMorgan
FXstreet.com (Bali) - According to John Normand and Arindam Sandilya, Strategists at JP Morgan, shorting the AUD as a proxy of the Chinese credit crisis continues to be favoured.
Key Quotes
"China is undergoing a credit tapering as the authorities attempt to control the leverage boom post-Lehman which has boosted credit-to-GDP to a risky level of over 180% (and still climbing)."
"Slower growth is almost inescapable consequence of this process, and a credit crunch more a risk scenario which acknowledges the difficulties of managing this deleveraging smoothly in each quarter."
"Given the possibility of worse growth outcomes than the official target of 7.5% or the consensus view of roughly 7%, worthwhile hedges are the obvious ones: shorting currencies with significant trade exposure to China, particularly if rising US rates already lend an upward bias to the US dollar versus most currencies."
"Selling AUD and South East Asia are the obvious choices. Selling NZD is not so obvious, since their exports to China (dairy) may prove more resilient to a slowdown in industrial activity."
Key Quotes
"China is undergoing a credit tapering as the authorities attempt to control the leverage boom post-Lehman which has boosted credit-to-GDP to a risky level of over 180% (and still climbing)."
"Slower growth is almost inescapable consequence of this process, and a credit crunch more a risk scenario which acknowledges the difficulties of managing this deleveraging smoothly in each quarter."
"Given the possibility of worse growth outcomes than the official target of 7.5% or the consensus view of roughly 7%, worthwhile hedges are the obvious ones: shorting currencies with significant trade exposure to China, particularly if rising US rates already lend an upward bias to the US dollar versus most currencies."
"Selling AUD and South East Asia are the obvious choices. Selling NZD is not so obvious, since their exports to China (dairy) may prove more resilient to a slowdown in industrial activity."