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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (24222)	12/30/2013 8:12:09 AM
From: ahhaha	Read Replies (2) \| Respond to of 24758

Excuse making: China Cash Crunch Eases but Worries Linger Fresh Wave of Demand Is Likely to Resurface Ahead of the Lunar New Year Holiday By Shen Hong Dec. 30, 2013 3:21 a.m. ET Reuters SHANGHAI—China's financial system steadied further Monday with short-term interest rates falling back down to normal levels, but analysts cautioned that demand for cash could soar again soon ahead of the Lunar New Year holiday at the end of January. A two-week scramble for funds that slammed stocks and bonds has eased as Beijing released cash for government expenditure, while banks have finished end-of-year fundraising that sucks liquidity out of money markets. The result is the weighted average of the seven-day repurchase agreement rate, a benchmark cost of loans between banks, dropped to 4.89% Monday, down from 5.10% Friday and 8.94% a week ago, which marked a fresh high since China suffered an even worse cash crunch in June. "The central bank showed the attitude that it didn't want interest rates to stay at unduly high levels by offering short-term liquidity, which eased concerns among financial institutions," said Xie Yaxuan, an economist with China Merchants Securities. Not too high, but just high enough to induce right behavior. However, attention on China's vast interbank markets may return soon when a fresh wave of cash demand is likely to resurface as banks will soon need to raise funds again to meet end-of-month requirements for January, plus companies and individuals will soon start shopping for the Lunar New Year, or Spring Festival, holiday starting Jan. 31. Notice this attempt to rationalize a system wide cause with a local short term transient explanation. "The market may face some challenges again when the Spring Festival comes, but I don't think liquidity conditions will deteriorate as long as the central bank remains supportive," said China Merchants Securities' Mr. Xie. The central bank has calmed the market by injecting 29 billion yuan ($4.8 billion) worth of cash into the interbank market last week. That followed a previous injection of over 300 billion yuan over a three-day period through a special and covert form of liquidity operation targeting a select group of banks. Covert? Translation: Give money to those who need it the most. According to these fools that can be calculated from review of the number of calls made by big banks to the PBOC begging for funds. The recent turmoil in China's money markets was sparked by banks and other borrowers in the world's second-largest economy nearing the end of the year when they typically need extra cash to meet regulatory requirements and funding demands from companies. Notice this second attempt at rationalizing a system wide cause with a local short term transient explanation. The greater the intellect, the greater the number of rationalizations produced. Other factors such as a drop in China's year-end government spending, which results in reduced funds flowing into the banking system from merchants, exacerbated the funding squeeze. Notice this third attempt...The intellect is getting desperate here. Running out of oxygen. I know it sounds persuasive to the pseudos, but how does "funding squeeze" result from a reduction of government spending? Sounds like the WH's explanation for the "crushing blow" delivered to the US economy by sequestration. Traders said there are signs that some of the government expenditure-related funds have entered the money market in recent days, which also helped ease the situation. An explicit contradiction. So which is it? What is "government expenditure-related funds"? Is that a credit or a debit? For a few days, the latest cash crunch looked reminiscent of the unprecedented liquidity crisis in June, when the weighted average of seven-day repos peaked at 11.62%. Isolated deals pushed the rate to a record 28%. The benchmark funding cost has averaged well above 4% since the summer cash squeeze, compared with slightly over 3% in the earlier part of the year and 2%-3% in previous years. The People's Bank of China has caught both banks and investors by surprise by maintaining an usually harsh stance since the June crisis, refraining from injecting funds into the system until the situation started to look out of control. The central bank has tightened its monetary policy in recent months, slowing the speed of overall credit supply and guiding borrowing costs higher so as to reduce the Chinese economy's unhealthy dependence on easy money and reining in banks' risky lending behavior. However, the PBOC's tough and inflexible stance has drawn criticisms. "The central bank slammed on the brakes too hard. It definitely needs to loosen the policy a bit and alleviate the pressure on liquidity," said Yu Shao, chief economist at Orient Securities. PBOC agrees. PBOC knows they can compute the proper quantity of money AND the proper level of rates to reach a happy equilibrium. And, eternal prosperity. It's only a matter of intellect and a supple wrist. "If we don't handle the liquidity problem well enough, it may well become a repayment issue," said Mr. Shao. True. Lenders won't be repaid.