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Tokyo based, expat Cape Bretoner. Learning to live in a de-leveraging world. Better suited to the crusades. CFA & FRM charter holder. Disclaimer: @Firehorsecaper reminds investors to always due their own due diligence on any investment, and to consult their own financial adviser or representative when warranted. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.
Joined Jun 23, 2015
80 Blog Posts

2016: Year of the Fire Monkey

Chinese New Year, aka the Spring Festival, Chunyun to the Chinese, the Lunar New Year is almost upon us. Monday February 8th is the kick-off and festivities run until February 21st. The monkey is the 9th of the 12 animals in the Chinese zodiac. The Chinese also apply 5 elements (metal, water, wood, fire and earth) to the calendar. 1956 was the last Red Fire Monkey year (i.e. animal/element combination).

On an annual basis, the Spring Festival represents the largest human migration, with all that are able (health & budget) heading home to visit family (an urban to rural migration in most cases). This is like American Thanksgiving on steroids. A full 1/3 of Beijing 20mm residents are on the move. China has 14 cities of over 5mm with similar travel plans. 40mm + domestic flights and over 250k train trips across the country. The focus over the lunar new year is on home and family, rather than business affairs. Rituals include cleaning and giving gifts of money in red packets that are supposed to  bring  i) good luck and ii) long life to the family.

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The PBoC have been busy. Short term liquidity facilities totalling 1.6tln Yuan (US$240bln) have been put in place. They have signalled a cut on the RRR is not likely before Chinese New Year, as many had expected. Much of the recent effort has been expended on stemming spec trade in offshore Yuan (CNH) which has brought it effectively in line with the onshore Yuan (CNY). Global market will get a much needed break from hanging on every sign of IBS from China. They will be both celebrating and praying for extra luck in this tricky monkey year ahead.

Don’t count out the Chinese due to a rocky 2016 start. Monkey contains metal and water. Metal is related to gold. Water is connected to wisdom and danger. The Chinese have a very healthy risk appetite. There is almost no limit to how much they will press. The biggest risk the Chinese face is that they get old before they get rich. I for one think they get rich. JCG

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2 comments

  1. infinitezuul

    Great article. Saw this mentioned briefly in a BBG article two days ago but nowhere near this detailed.

    I think the main point is that the Chinese will effectively disappear at a very opportune time for the markets, allowing real markets to recover and forget.

    The Chinese Problem is not reconciled, but may hibernate for a bit. Great news.

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  2. probucks

    I remember last year mkts rallied though their celebration. I’m sure they’ll have all the unpatriotic people who refuse to go full tilt into their holiday executed. Thus… a rally may continue assuming the Chinese FX fuckery is contained

    Good post man. i 4got about this coming up.

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