Phisix: A Rollercoaster Session Backed by the Return of Index Managers as Short Term Yields Soar (again)!

What a day!

Today’s market volatility has been fantastically a rare event!

First, yields of Philippine short term treasuries continue to spike!

It’s a second day of the week where yields of 3 month, 6 month (above charts) and 1 year (below left, 1 month included but not in charts) Philippine treasuries have moved sharply upwards. Current two day gains add to the previous two weeks of yield expansion.

Surging yields effectively translates to higher short term financing costs, a symptom of liquidity squeeze and could even signify seminal indications of a developing credit crunch!

As one would note, yield levels of short term government papers have breached June 2013 taper tantrum highs. Then, the spike in yield signaled a contagion from a mostly emerging market selloff. This time, it has been a domestic affair.

Additionally, with short term yields increasing more than the longer spectrum, there has been a dramatic flattening of the Philippine yield curve. Yield of 10 year Philippine peso bonds even declined today (right window).

And even from a mainstream perspective, I previously noted that flattening yield curves have been precursor to an economic growth slowdown.

Even more, if the current rate of the yield increases will be sustained, then this could lead to a yield curve inversion—where short term rates will be higher than the longer term—a reliable indicator of recessions.

Yesterday I wrote of how this could be reached.

The fundamental premise is that current highly leveraged firms or institutions who have been starved of cash could be desperately borrowing at higher rates to fund operational financing gaps in order to maintain current projects or positions. And this applies to both stock market speculators/market manipulators and entities which mostly belong to the bubble industries.

If my suspicions are right, then not only will stock market manipulators have impaired balance sheets, but they will be NET sellers of stocks (at vastly lower prices)!

The same liquidations will be resorted to by cash strapped bubble industries (keep an eye on casinos, and the property industry)

So the populist G-R-O-W-T-H theme will transmogrify into LOSSES and eventual LIQUIDATIONS.

Yet the feedback loop between accruing losses and increasing credit strains will extrapolate to higher demand for short term loans which should drive short term yields to even higher levels relative to the longer end.

If such dynamic is sustained then this will eventually lead to a yield curve inversion. The inversion will now signal a recession, if not a crisis!

So current Philippine yield curve conditions have likely been signaling emerging perils in the real economy.

Even more exciting today has been the activities in the domestic stock market.

The Philippine Stock Exchange today experienced a really wild rollercoaster ride which may be one for the books.

Today’s session had been marked by two roundtrips (see right window from technistock.net) and the spectacular return of the market riggers!

Following last night’s Fed chair Janet Yellen sponsored stock market party, where US stocks surged to its “best session of the year as investors celebrated…the Federal Reserve's pledge to be patient in raising interest rates” (CNBC) the Phisix gapped up to an early morning peak with gains of 111.04 points or 1.6%!

About a little more than an hour’s time, the entire 1.6% of gains shockingly evaporated! This marks the first roundtrip.

Not only has gains dissipated, the Phisix broke the 6,950 and 6,900 levels in the late morning dump! The dump translated to a maximum loss of 84 points or a 1.2% decline!

Yet following lunch break, the “afternoon delight” aspect of OPLAN Phisix 7,400 went on stream. Operators coupled with domestic bulls went on a bidding mania, where the 84 points or 1.2% morning loss had been entirely recovered through the last minute. This marks the second roundtrip. 

A minute towards the run off, the Phisix was up by only 4.71 points. (see left window from colfinancial) Yet at the closing bell, the Phisix surged by 63.07 points or .91%!

What an incredible day. The two roundtrips meant that the Phisix moved by 453 points or a staggering 6.5%!!! Importantly, almost the entire of the gains of the day, specifically 92.5% of the .91%, was due to the marking the close!

Given the wild pendulum swings, volume was relatively heavy at Php 9.47 billion. With special block sales this expanded to Php 10.98 billion. (PSE Quote)

Foreigners sold a sizeable net Php 1.095 billion worth of shares.

Decliners beat advancers by almost 2:1 or by 121 to 68. This signifies another sign that the Phisix wanted to correct but which the desperate market manipulators will not permit.

Today’s index manipulation has basically been a three industry rendition.

While all 5 sectoral indices posted pumps at different degrees, the biggest came from the holdings, the all-time favorite property, and the services sector (see above)

And the bulk of those last minute panic buying came from SM, AEV and SMPH.

Last minute pumps are hardly about profits. Rather they are about setting impressions.

Yet market manipulators continue to accumulate severely overvalued securities at record prices or near record high prices in the hope that some “greater fools” would buy what they will sell.

The problem is what happens if the markets go down?  These operators function with no margin for errors.

Former Morgan Stanley analyst and now hedge fund manager Stephen Jen recently warned of a coming emerging market crisis. He says that today’s experts have little knowledge of 1990s.

From Bloomberg,

If the 48-year-old native of Taiwan, with a PhD from Massachusetts Institute of Technology, sounds a little jaded now, it’s not without some reason. He says he worries that many emerging-market analysts are too young to remember the late 1990s. Instead they learned the ropes in an era dominated by the rise of Brazil, Russia, India and China -- a supposed one-way bet to prosperity.

“Many became EM specialists after the term ‘BRIC’ was coined in 2001 and don’t know any serious crisis,’’ says Jen, who now runs the London-based hedge fund SLJ Macro Partners LLP.

The youngsters are about to be schooled. Jen says echoes of 1997-1998 may be at hand.

I believe that his warnings will also apply to the “youngsters” of the Philippine markets, who may be part of team OPLAN Phisix 7,400 or if not the lemmings enamored with easy money or those who merely find comfort by running with horde and prioritize social signaling (particularly those in the internet circles). 

A lot of them will also get "schooled".

Swiss Central Bank Imposes Negative Deposit Rates!

The Keynesian euthanasia of the rentier policies of abolishing interest rates has been intensifying.

Today, the Swiss National Bank joins the ECB (June 2014) and Sweden (2009) to implement negative deposit rates supposedly intended to discourage capital flows.

From Bloomberg:

The Swiss National Bank (SNBN) imposed the country’s first negative deposit rate since the 1970s as the Russian financial crisis and the threat of further euro-zone stimulus heaped pressure on the franc.

A charge of 0.25 percent on sight deposits, the cash-like holdings of commercial banks at the central bank, will apply as of Jan. 22, the Zurich-based central bank said in a statement today. That’s the same day as the European Central Bank’s first decision of 2015.

The SNB move follows Russia’s surprise interest-rate increase this week and hints at the investment pressures that resulted after that decision failed to stem a run on the ruble. Swiss officials acted as the turmoil, along with the imminent threat of quantitative easing from the ECB, kept the franc too close to its 1.20 per euro ceiling for comfort.

As one would notice, the SNB’s has supposedly been responding to unintended consequences from previous interventions

And since every interventions create unintended economic and financial dislocations, these has prompted policymakers to apply even more interventions which furthers the imbalances. Thus one intervention begets another. The ramification of which is a massive accumulation of distortions, or malinvestments pillared on the destruction of savings or capital consumption that eventually results to a crisis

As great Austrian economist Ludwig von Mises warned in his magnum opus the Human Action (bold mine)

The age-old disapprobation of interest has been fully revived by modern interventionism. It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether. All present-day governments are fanatically committed to an easy money policy. As has been mentioned already, the British Government has asserted that credit expansion has performed "the miracle...of turning a stone into bread." A Chairman of the Federal Reserve Bank of New York has declared that "final freedom from the domestic money market exists for every sovereign national state where there exists an institution which functions in the manner of a modern central bank, and whose currency is not convertible into gold or into some other commodity." Many governments, universities, and institutes of economic research lavishly subsidize publications whose main purpose is to praise the blessings of unbridled credit expansion and to slander all opponents as illintentioned advocates of the selfish interests of usurers.

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

And why does it seem that we are in a crisis for central banks to resort to unprecedented emergency measures?

Naturally Wall Street love such invisible transfers—policies which confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some—as they are one of the key beneficiaries.

And so today’s continuing party.

Phisix Crushed as Yields of Short Term Philippine Treasuries Soar!

Readers of this post has repeatedly been warned: market crashes and magnified volatility has been occurring real time. And this has been a global phenomenon which appears to be spreading and intensifying.

The consensus G-R-O-W-T-H theme seems in SERIOUS jeopardy. They are in BIG trouble not because the local stock markets slumped BIG today. They are in BIG trouble because today’s spike in short term yields in the domestic bond markets which adds to last week’s surge, may have more than been indicative of tightening liquidity or a mad dash for cash, they are in BIG trouble because today’s spike looks like manifestations of embryonic signs of a developing CREDIT CRUNCH!

Yields of 1 month, 3 month, 6 month and 1 year have substantially jumped today as shown above.

Yields of these short term domestic treasuries have either vaulted to past June “taper tantrum” highs in 2013 or have reached such levels. Remember that the June “taper tantrum” sent the Phisix into bear market levels.

Yields of 10 year treasuries climbed too. But the uptick has been less than the short term yields. This indicates of a dramatic flattening of the yield curve.

I wrote about this last week:

From this perspective I offer a different explanation. The two week spike in short term yields represents a scramble for liquidity!

The short term rates 3 month, 6 month and 1 year have all reached June 2013 highs. To recall, June 2013 was when the taper tantrum PLUS BoJ’s QE 1.0 triggered turbulence in global financial markets, so the spike in short term rates then has been consistent with concerns over liquidity. 

There have been little signs of turmoil (yet). The peso has been nearly unchanged for the year even as the neighboring currencies have been severely buffeted on likely heavy interventions by the BSP. The Phisix remains above 7,000. Despite failing to meet consensus expectations, statistical growth remains above 5%. In addition, media and experts continue to serenade economic hallelujahs even as neighboring financial markets have been roiling from weak currencies.

So this, in my view, may have been about debt IN debt OUT that may have reached proportions whereby demand for short term loans have become greater than long term loans, thus the spiraling demand equates to the public willing to pay for higher short term rates. And demand for such short term loans may have been reflected on the yields of short term treasuries.

And demand may have originated from cash constrained borrowers who may be competing to secure funds to oversee the completion of their capital intensive based projects on mostly bubble sectors, and or from highly levered asset speculators (real estate and stock markets) who may be jostling to acquire short term funds in order to settle existing liabilities as returns have not been sufficient to cover levered positions. Could this be the reason behind the obsession over managing of the stock market index?

The sharply expanding bank credit growth in the light of steeply decelerating money supply growth as statistical economic growth slows seems to dovetail with the greater demand for short term funds; the highly levered sectors of the economy haven’t been generating enough cash from a growth slowdown and from untenable debt levels so the dash for loans from the banking system to pay existing debt even at higher rates. 

It remains to be seen if the current developments represent an aberration or if my suspicions are right where short term yields have been about emergent signs of liquidity strains.

But if my suspicions are correct, where short term rates continue to climb, this will affect many businesses via higher financing costs. There will be a cut back in expansions as losses will mount.

And if the rise in short-term yields engenders an inverted yield curve–where short term rates are higher than longer term rates—then the consensus will even be more startled because inverted yield curves have mostly been reliable indicators of recessions! 

An inversion will likely occur when a credit crunch has become evident. 

I asked in the above “Could this be the reason behind the obsession over managing of the stock market index?”

In support of the index, market manipulators have been buying stocks at either record highs or near record highs, so with the market’s recent declines, losses have been mounting.

If taxpayer money has been used, then political agencies will soon see losses and deficits. Losses will also hound private institutions even if they used only surplus/reserve cash for stock market speculation. 

Yet the more important factor is leverage. If the market manipulator/s pumped up stocks with credit, then current losses will render them, not only losses, but with inadequate funds to pay the existing debt. The lack of funds will compel levered institutions to scramble to borrow short term money even at higher rates.

I think this applies also to heavily geared ‘bubble’ institutions (real estate, shopping malls, hotel and financial intermediaries) or levered firms that have not been generating enough cash flows.

So these cash flow deficient heavily leveraged firms may have been desperately competing to borrow money to cover the funding gaps that has sent yields to the present 2013 taper tantrum levels!

If my suspicions are right, then not only will stock market manipulators have impaired balance sheets, but they will be NET sellers of stocks (at vastly lower prices)!

The same liquidations will be resorted to by cash strapped bubble industries (keep an eye on casinos, and the property industry)

So the populist G-R-O-W-T-H theme will transmogrify into LOSSES and eventual LIQUIDATIONS.

Yet the feedback loop between accruing losses and increasing credit strains will extrapolate to higher demand for short term loans which should drive short term yields to even higher levels relative to the longer end.

If such dynamic is sustained then this will eventually lead to a yield curve inversion. The inversion will now signal a recession, if not a crisis!

The consensus better supplicate from the Almighty that these short term rates be immediately tempered or pacified soon otherwise hell may break loose.

It’s also important to emphasize that magnified volatility won’t merely signify as contagion from external events but also in response from internal imbalances generated by credit fueled artificial booms from financial repression policies channeled through zero bound rates.

Perhaps foreigners smells something fishy with current conditions, thus today’s stock market plunge.

The Phisix got crushed by 2.71%! 

Apparently stock market operators seems to have lost control. They had been repelled yesterday, where the Phisix tanked 1.58% and today. And for the second successive day stock market operators had been treated with a dose of their own medicine. Or might I say karma.

Attempts to shield the Phisix from reality by rigging the index seem to have only worsen the profit taking activities or the market slump. 

This index management had been most evident when the domestic market surged higher in the face of a regional and global selloff.

The portrayal that domestic stocks would be immune to global events has been demolished by the actions of the last two days.

The two day loss, which accrues to 4.29%, sends the Phisix to about the October lows. A breakdown from October lows will trigger the bearish portent from the double top formation.

The intense selloff today had been broad based. All sectors except the mining industry suffered losses of 1.8% and above. Peso volume at Php 10.99 billion was heavier compared to the days of the index pumping. Total volume inclusive of block sales reached Php 11.37 billion.

Today’s stock market bloodbath comes with heavy foreign selling which amounted to P 2.035 billion. This marks the third day of heavy (Php 1 billion above) net foreign selling. Again, are foreigners sensing the trouble from the sharp increases in short term yields and from the drastically flattening yield curve?

Again this isn’t just about contagion but also about domestic imbalances that are about to unravel.

Misery loves company. The Phisix today has been accompanied by another rout in Vietnam’s equity market. The freefalling Ho Chi Minh Index sank 3.16% and may be the first regional equity benchmark to reach a bear market having been down 19% since the September highs.

As a final note, the Philippine Stock Exchange announced the imposition of a maintenance fee of 50,000 pesos a month on all inactive trading participants which will commence in January 2015.

Given that the shorting facilities have hardly been functional but mostly symbolical, this leaves trading participants to rely on bullmarkets to become "active". 

Yet such ruling assumes stock markets only go up! That’s because in bear markets volume usually dries up. So trading participants will have to either sell false (bull market) premises just to induce "active" trading or pay fines. 

No wonder the principal-agent problem that beleaguers the industry.

Macau’s Casino Stocks Collapses Again!!!

Another day, another smash up of Macau’s blue chip casinos stocks! 

The last time these stocks had been devastated (by a milder degree) was during the 3rd of December.

Today’s sell down has been stunningly horrific...

MGM China Holdings (HK:2282)

Galaxy Entertainment Group (HK:27)

Melco Crown Entertainment (HK: 6883)

Sands China Ltd. (HK: 1928)

Wynn Macau Ltd. (HK: 1128)

SJM Holdings Ltd. (HK:880) owner of Grand Lisboa

The Chinese government reportedly will “launch a major crackdown on the multibillion-dollar flow of illicit funds through Macau casinos” says the Business Insider. So it is likely that the reported plans to tighten money flows (against the political opposition) has exacerbated current woes.

Today's carnage only deepens their respective bear markets.

Meanwhile, Genting Malaysia (4715.KL) and Genting Singapore (G13.SI) closed up 2.78% and .97% respectively today. This reinforces the Chinese politics driven response on Macau's stocks.

But today’s bounce doesn’t neutralize the dominant downside actions for these non Macau Asian casino stocks.

The general weakness in Asia’s casino stocks have been symptomatic of the region’s economic conditions. Additionally, casino stocks may just function as the causa proxima or event risk that may trigger a contagion within the region.

Relentless Run in GCC’s Stock Markets and in Russian Financial Assets! Japan Import Growth Shrinks as Exports Slow

Last night, European crude benchmark Brent resumed its hemorrhage and was down 1.96% while the US counterpart the WTIC bounced .18%

And the incredible stampede out of GCC stock markets continues…

(table from ASMAinfo.com)

Last night too, Saudi’s Tadawul and Dubai Financial crashed by another 7.27%. Qatar, Muscat and the Kuwait slumped by 3.51%, 2.92% and 2.08% respectively. All these adds to Sunday December 15th crash!

Once record high stocks is being dismantled at an astounding speed and stupefying rate of decline. The obverse side of every mania is a crash.

Oh by the way, Western banks have reportedly cut cash flows to Russian banks, as the Zero Hedge noted “FX brokers advised clients that any existing Ruble positions would be forcibly closed out because "western banks have stopped pricing USDRUB", over concerns of Russian capital controls.”

The article further quotes the Wall Street Journal "global banks are curtailing the flow of cash to Russian entities, a response to the ruble’s sharpest selloff since the 1998 financial crisis."

So along with plummeting oil prices and economic sanctions, the liquidity squeeze exacerbates the stunning run on Russian financial instruments. At the rate of the evolving Russian financial market turmoil, the odds of a default has been soaring as revealed by the skyrocketing CDS or the cost to insure debt as shown in the chart above.

“Curtailing the flow of cash” reveals how global liquidity is being drained. If risk assets are about liquidity, credit and confidence that the latter two generates, then the shriveling liquidity flows poses as increased structural headwinds on risk assets. If sustained then  asset inflation will turn into asset deflation.

My final note

Last November, Japan export growth year on year has underperformed consensus expectations despite the crashing yen.

The USD-Yen has been up by  14.7% since the BoJ GPIF bailout of the stockmarket

Export growth fell by 4.9% and has been in a decline since November.

This is another evidence which debunks the popular mercantilist “weak currency-strong export” myth peddled by the consensus.

Also Japan’s import growth has collapsed again. It has CONTRACTED by 1.7% over the same period. The slump in imports reflects the demand conditions in the Japanese economy.

This represents the "wonders" of Abenomics--doing the same thing over and over again and expecting different results.

Additionally, Japan's imports are someone else’s exports. Japan represents the largest export market for the Philippines as of 2013. Contracting imports means marginal growth or even zero or reduced exports for the Philippines to Japan!

As I noted last weekend,

...one nation’s imports signify as some other nation’s exports. As noted above, Chinese import growth contracted in November (y-o-y), Germany’s import growth rate also CONTRACTED 3.1% month on month in October. For the Philippine bulls who sees virtually no risks, but all glory from credit fueled levitated assets, how will collapsing Chinese and German demand for imports, affect domestic exports? Do they know? In 2013, exports to China ranked third of Philippine exports with 12.4% share and Germany ranked sixth with a 4.1% share. Signs are already here, Philippine export growth rate collapsed to 2.9% in October from the stellar over 10% growth rate during the past four months, specifically 15.7% in September, 10.5% in August, 12.4% in July and 21.3% in June. Add these to the collapsing markets of the GCC, which places OFW remittances at risk. So where will demand come from? Domestic demand has already been constrained by credit overdose as revealed by investments on a downtrend, and by growth in credit and statistical economy that has been moving in opposite directions, and by consumers harassed by BSP’s invisible redistribution favoring the political and economic elites. So where will Philippine statistical growth come from? Statistical massaging? Or manna from heaven?

The world economy has been deteriorating, liquidity has been shrinking, yet domestic bulls are expecting G-R-O-W-T-H!

Pride goes before destruction, a haughty spirit before a fall (Proverbs 16:18)

Said differently, a fool and his money are soon parted.

Phisix: Marking the Close: A Dose of Own Medicine Redux; Emerging Asian Stocks Meltdown

Market manipulation has its natural limits.

Of the frequent attempts to manage the Phisix higher at the close, I have noted of two major instances were such attempt has failed, one in November 25 and another in December  4.

Today marks the third. 

The fundamental barrier will always be scarcity; whether this has been financed by taxpayer money, depositor money, treasury funds from corporations owned by plutocrats and from credit markets or a combination thereof. Other obstacles could be from regulations, access to liquidity, sentiment, sheer volume, et.al.

Notice that such reversals or repulsions on market manipulations have come at a very close space. That’s a sign of the frequency of engagements by stock market operators. It’s also a sign how vulnerable they are ( chart from technistock)

Perhaps stock market operators met their match today. But it didn’t stop them from trying. There was an attempted “afternoon delight” or an afternoon pump, (green square) unfortunately bears retained control of the session especially during the closing moments and “dumped” stocks at the last minute. Stock market operators essentially got a dose of their own medicine…again. Now stocks which they bought at the highs (from previous operations) will signify as floating losses.

Perhaps too that the stock market operators exhausted themselves from the fantastic whole day operations last night.

Yet if operators used levered money for the pump, eventually they might become forced sellers too….when creditors makes a call on their loans.

As one would notice, it doesn't take legal actions to curtail these unscrupulous activities, the laws of economics will serve as their nemesis.

The Phisix eventually succumbed to profit taking down 1.58% on heavier volume than the series of market “pumps”. Declining issues led advancing 108-66 (PSE quote) which has been consistent with today’s downturn.

Today’s domestic market slump has been coherent with the region’s stock market actions.

Just look at the erstwhile sizzling hot record after record breaking Indian stocks. They have NOT decoupled from the meltdown. Both the Sensex and the Nifty were slammed 1.56% and 1.66% respectively today(quotes from Bloomberg). So last week’s breakdown by the SENSEX from the one year trendline seems to have been validated.

Malaysia and Thailand’s bleeding continued today. The KLSE sank 1.38% while the SET which suffered an incredible bout of an intraday crash yesterday closed 1.13% down. Yesterday, the SET collapsed by an astounding 9.2% before recovering to close at down 2.4%

Indonesia’s JKSE dropped 1.61% while Vietnam’s HCM Index plunged 2.33%. South Korean Kospi was clobbered .85% while recent outperformer Singapore’s STI was trounced 2.4%

What you are seeing have been symptoms of a regional meltdown. If these dynamics persist or worsens, then the 1997 scenario could be a model. In 1997, crashing stocks eventually exposed on, or manifested, the region’s economic excesses, which mutated into a crisis.

So unlike stock market operators who see ALL gains and NO risk from the illusions brought about by a credit boom, current dynamics suggests otherwise; a very risk fertile environment susceptible to a crisis.

Of course, no trend goes in a straight line, there will be interim bounces.

Remember, decoupling is a myth. If these are symptoms of deflationary bubble bust, then contagion will be the shared denominator.

As Philosopher George Santayana once warned, those who cannot remember the past are bound to repeat it

Yesterday, Thailand’s SET suffered from a Massive Convulsion! More signs of ASEAN's Deflating Bubbles

I was startled to see this…

(chart from stockcharts.com)

I thought the above signified  a data error. I checked and found out that this has been accurate…Thailand’s SET suffered from a massive intraday CRASH! The SET collapsed by as much as a shocking 9.2% (!!!) before a late day recovery. The SET closed the session down by still a whopping 2.41% decline! 

Yesterday’s loss compounds on last week’s 5.18% slump!

From the Bloomberg:

Thailand’s benchmark stock index fell the most in 11 months as energy companies slumped on a rout in crude and investors speculated this year’s rally was excessive relative to earnings prospects.

The SET Index (SET) dropped 2.4 percent to 1,478.49 at the close, taking a five-day decline to 7.5 percent. The gauge briefly tumbled as much as 9.2 percent in afternoon trading before recovering most of its losses. PTT Exploration & Production Pcl (PTTEP) retreated for a seventh day, while its parent PTT Pcl (PTT), Thailand’s biggest energy company, tumbled 4.9 percent. The two stocks represent about 10 percent of the SET Index by weighting.

“Thai stocks have been hit by foreign selling as investors pull out from emerging markets,” said Mixo Das, an Asia ex-Japan equity strategist at Nomura Holdings Inc. in Singapore. “A large listed oil-and-gas sector and expensive valuations relative to history are adding more pressure.”

The report rationalizes that “this year’s rally was excessive relative to earnings prospects”. 

Well as I have been saying, stocks are driven by liquidity, credit and confidence. The latter of which is a product of the the former two.

Two weeks back I wrote,

To sum it up, since 2008, stocks have NOWHERE been about G-R-O-W-T-H, but about LIQUIDITY and CREDIT from which CONFIDENCE or MOMENTUM has been a product of. Expand liquidity and or credit, then financial assets (stocks, real estate, bonds etc…) booms, regardless of the direction of the economy.

Hounded by negative real rates via zero bound (financial repression), the public response to such policies have been to chase on yields even when they have been pillared from gross misperceptions.

Yet take away credit and liquidity, the illusion of CONFIDENCE and MOMENTUM evaporates.

The same factors can be seen in Thailand whose economy has been walking a tightrope between stagnation and recession but whose stocks, via the SET, like the Philippines (whose chart also has been replica of the Phisix) have been approaching milestone highs. The SET has been up 23% y-t-d as of Friday.

Take away credit and liquidity, the illusion of CONFIDENCE and MOMENTUM evaporates: "This year's rally was excessive" 

Clues had already been present, Thailand’s banking loan growth was reported to have registered a huge decline in 3Q 2014—a sign of diminishing liquidity. I wrote:

Despite the marked slowdown in the Thai economy, and the reported recent slowdown in bank lending, it is still surprising to see lofty levels in credit expansion in the private sector in 1H of 2014 (left), but money supply seems to have plateaued for the year

Again, the SET episode simply demonstrates that global and regional deflationary pressures have returned big time!

Oh by the way, I earlier posted that the Indonesian rupiah have reached at ALL time lows. 

I guess the pressures on the currency has spilled over to her stock markets as the JKSE at presently trades down by sizeable 1.8+%. The JKSE as I posted last week has a minor head and shoulder formation: a break of around 4900 would extrapolate to a considerable downside if the chart's portent should be validated. 

Deja vu 1997?

Update: The Thai SET opens today's session with a big 3% decline!

Global Stock Market Rout Continues, Russian Government Hikes Rates from 10.5% to 17%!

European stocks started strong, but ended the day in another carnage as oil prices continued its free fall. European Brent oil sunk 1.03% as US WTIC collapsed 3.62%!

The table from Bloomberg says it all

UK’s FTSE now at October levels, the French CAC just a few points away from the same area, the German and the European Stoxx600 likewise in a steep fall.

Interestingly, in order to stem capital flight and the collapse of her currency the ruble Russia’s central bank stunningly hikes official policy rates from 10.5% to 17%!

From the Bloomberg:

Russia’s central bank raised its benchmark interest rate the most since the nation’s 1998 default, making the announcement in the middle of the night in Moscow as policy makers seek to douse investor panic and stem a ruble rout.

The central bank increased the key rate to 17 percent from 10.5 percent effective today, it said in a statement on its website. Policy makers gathered for an unscheduled meeting after a one-point increase on Dec. 11.

“This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” the bank said in the statement.

Russia’s central bank raised interest rates for the sixth time in 2014 after more than $80 billion spent from its reserves failed to stop a 49 percent selloff of the ruble, the world’s worst-performing currency this year. President Vladimir Putin, whose incursion into Ukraine’s Crimea peninsula in March prompted the U.S. and its allies to strike back with sanctions, this month called for “harsh” measures to deter currency speculators.

The chart above of the USD Russian (RUB) gives an idea of how the ruble has recently been smashed from collapsing oil prices exacerbated by economic sanctions imposed against Russia  by Western political economies.

The stunning rate hikes will hurt domestic debt holders!

Oh by the way, speaking of crashing currencies, neighboring Indonesia’s currency the rupiah has now reached record lows. Or alternatively said the USD- Indonesia IDR is at record highs!

The USD Malaysian ringgit (MYR) seems headed that way too!

Financial pressures have reared their ugly heads in ASEAN financial markets

Meanwhile US stocks was partly affected by the European stock selloff…

Oh don’t worry be happy. Philippine stocks will rise forever!

Middle East employers of OFWs will NOT be affected by the current financial market crash. Shrinking global trade will NOT impact demand for local goods. Slowing GDP has been an ANOMALY which means harried consumers (from BSP's inflationism), declining investments and slowing output have signified as aberrations or temporary dislocations. Debt can perpetually rise WITHOUT consequence of impairing balance sheets of the consumer and mostly of the highly levered supply side firms (mostly owned by domestic plutocrats). Falling peso and regional currencies will hardly will affect decisions of foreigners on their portfolio holdings of Philippine stocks, bonds, properties and currency, or simply stated, profits and losses or economic calculation have now been VANQUISHED! BSP actions of two interest rates and, SDA hikes and requirements to raise bank capital plus the ongoing depletion of GIRs (combined with the other flows that didn’t appear in the GIRs) to defend the Peso will have NO impact on liquidity conditions. Property prices can only rise forever WITHOUT real economic dislocation where the law of demand has been REPEALED!

Don’t you see we have reached economic nirvana! No amount of global meltdown will stop the domestic stock market boom. That’s what stock market operators, who has been rigging the markets with impunity, wanted to show!