China snuck something out last Friday that just might be pretty significant…
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It’s Swiss National Bank reserve figures Wednesday! That glorious day when we get to see how exactly the ingredients of the SNB’s cake have changed. Or to put it more literally, how have they been dealing with the masses of euro assets they are collecting.
Here’s the table in question. What it shows is that the SNB has cut its euro share of FX reserves to 48 per cent from 60 per cent in the second quarter of 2012 while the proportion of sterling and dollars being held increased.
Gasp? Well… yes. Read more
There have been a few estimates of large scale capital flight out of China recently that don’t exactly tally with other signals. The strength of the yuan is among them, though it admittedly may be explained by myriad other factors.
Capital flight has largely been calculated by movements in China’s FX reserves, with reference to other variables such as the trade surplus, FDI and movements in exchange rates. Read more
The end-users, the clients, the buyside. Or in more standard parlance – institutional investors. Not “buyside” like hedge fund — more like your pension fund, insurance companies, reserve managers, sovereign wealth funds, and investment funds more generally.
While chapter one of the IMF’s Global Financial Stability Report covered the €200bn capital hole spillovers, chapter two discusses the characteristics and behaviour of institutional investors. Read more
Up until April this year, US banks had a nice little earner.
As Freakonomics explained, big banks were able to borrow cash from the Fed funds or repo market for say, 15 basis points, posting US Treasuries as collateral, and then deposit the cash received with the Federal Reserve overnight at 25bps, earning some 10bps. The FT has estimated that since late 2008, this risk-free arbitrage may have netted America’s banks as much as $200m in profits. Read more
Gold prices hit on Monday a fresh record high of almost $1,265 a troy ounce following the revelation that Saudi Arabia, the world’s largest oil exporter, is sitting on more than twice as much gold as previously thought, according to new estimates, reports the FT. The disclosure points to the revival of bullion as part of emerging economies’ official reserves and comes as investors pour money into the yellow metal.
If most of the media agrees that China’s decision to enhance the yuan’s flexibility was a step in the right direction, many currency analysts are voicing some of their own reservations — not least in terms of the future of the PRC’s FX reserves, writes FT Alphaville. Read more
Some critics are doubtful about the significance of Beijing’s moves on the exchange rate of its currency — but the volumes devoted to China’s weekend statement on currency flexibility on Monday morning would suggest otherwise, FT Alphaville writes. Read more
China, which boasts the world’s largest foreign exchange reserves, is reviewing its holdings of eurozone debt in the wake of the crisis that has swept through the region’s bond markets, the FT reported. Representatives of China’s State Administration of Foreign Exchange, or Safe, which manages the reserves under the country’s central bank, have been meeting with foreign bankers in Beijing to discuss the issue.
China’s central bank said on Sunday it will raise the amount banks must hold in reserve for a third time this year, the latest move by Beijing to cool its booming economy, the FT reports. The increase came after regulators ordered China’s largest banks to re-examine their loan books and provide estimates of their exposure to un-collateralised loans, especially to provincial governments.
Remember, the good old days of China’s dollar bashing? Well, no more. There is a new victim in town, and it’s called the euro, FT Alphaville reports. Read more
Worried about Chinese banks? Pfiff.
Standard Chartered has some intriguing reasons why you don’t need to be – all revolving around the strength of the banks’ sovereign backer, the People’s Republic of China. Perhaps you’ve heard of it? Read more