Blue Point Trading Market View – June 12, 2013
China trade balance surges in Q1 2013 – signs of recovery? Recent Chinese trade surplus data shows a whopping increment of USD 18.2 billion in April recovering from a drop of USD 0.88 billion in deficit from the previous month. Chinese trade has been severely suffering due to the sharp decline in recent European and US exports. The trade surplus data release shows positive signs in the Chinese recovery mode and might help it to bring back hopes of a targeted 8 percent growth from its current 7.7 percent growth. Does this sharp turn around indicate that the global economy is starting to heat up?
China’s trade surplus is one-tenth the official $61 billion reported so far this year after accounting for fake transactions used to disguise hot-money inflows, Bank of America (BofA) says. They go on to suggest that calculations of the surplus, shrank instead of tripling from a year earlier, a sign that global demand is restraining rather than boosting the world’s second-largest economy. Bank of America’s estimate underscores the size of possible discrepancies in the Chinese trade data.
According to BofA, Chinese calculations may have included exports and imports that enabled money flows for people engaged in arbitrage between the onshore and offshore exchange rates for the yuan. They speculate that shipments of gold in and out of Hong Kong have been for this purpose, since valuable goods with low transportation costs are “ideal channels” for hot money flows. Gold bugs have long been pedaling the Gold manipulation story. In any case it does seem as there are growing numbers of people engaged in the Gold arbitrage business.
So are the Chinese numbers fake? When looking at the thumbnail chart, the recent report has been huge – should we not see this pop in Chinese trade elsewhere? Looking at the US trade figures (China’s biggest trading partner) – click here – there is a bit of blip but certainly not to account for this recent Chinese phenomenon. So perhaps BofA are correct in their analysis. In any case it does seem that the China recovery story is suspect and the recovery is at best exaggerated.
Daily Market View: (click here for the video)