Is Great Wall Of China Liquidity Closing The Gates?

There is a fascinating action in the US bank equities also today, as we broke the downward trend on the first day of trading this year. Click on chart to enlarge, courtesy of StockCharts.com

One of the largest concerns for bank shareholders has been unemployment. The direction of the movement appears to be right so far, and that is enough to drive the bulls now. Let' s see what we sing tomorrow!

However, the gigantic gates of the Great Wall of Chinese liquidity seem to be closing, but very very slowly for now. Asian equity markets were bleeding today, and Europe joined the red sea until European mid-day.

Societe Generale remains cool on Chinese move today, by explaining:

... China has the harsh lesson of 1992-93 when bank lending was abruptly curtailed and non-performing loans started to rise sharply.

Why? Simply because as in 1992-93, China's banks are currently lending for multi-year projects, such as expansion of the railways. If China were to cut bank lending aggressively now, the result would be a half-built railway track, or an incomplete irrigation project. These projects would immediately be non-viable and Banks would be saddled with a large non-performing loan problem.

Click on charts to enlarge, courtesy of Societe Generale.


Simply put all those conspiracy theorists with Total NSA Unemployment Claims Hit Another Record and Treasury Flooded Consumers With Money In December, Just In Time To Unleash Holiday Shopping "Animal Spirits" aside, kill all prominent bears and join the herd of best bulls?

Close your eyes ...