Thread by @CurrencyWar1

Evidence China Manipulates S+P
I've argued China bought dips 17 X from March Asian lows. bit.ly/2VQ4trY Price action today same MO-> rally on little news, coincidentally rallies also. @WSJ concludes same. Asia Buys While U Sleep on.wsj.com/2KnmM2i

Why China Buys US Stocks
Aug 2015 Yuan Deval established a direct causal effect between weaker Yuan and weaker US stocks. Thru my career market participants would say that when when rolls over, correlations converge to 1 likely due to globalisation inter-connectivity. Thus

as china exported #COVID19 , global disconnectedness generated negative tail risks and blowback, opening China up on many front's. The negative export loop where exporting #COVID19 lead to a global pandemic and a collapse in its export's increasing Yuan / interdependence.

An added complication is that China is beta testing its new DCEP. DCEP is phase 1 of a 2 stage process to make the renmimbi the worlds 1st Digital Reserve Currency. Labelled as the currency of consumption, the project's genesis centred on 2015/17 when Yuan outflows threatened

Yuan sovereignty. Wuhan increased chances that china's cover-up and lets be honest bungling by Trump and many other western leaders in their responses, the feedback loop wouldn't just be restricted a natural drop in global demand, worse still that global leaders would

scapegoat China or indeed send them the bill for their selfish behaviour. This is not ideal environment to birth a new reserve currency alternative (early stages) to the dollar. EMFX has shown the direction here, collapsing global demand generating significant exchange rate

depreciation creating an additional competitiveness shock for China. Not only is demand in the west collapsing, but their EM counterpart's are stealing a competitive march on China as their currencies depreciate. China faces multiple challenges. A wave of de-globalisation hurting

export's. The stricture of having to keep their currency stronger than they might ordinarily do to copper fasten Yuan credibility to counteract this ''own goal crises''. Europes experience serves a salutory warning. A critical component underpinning any currencies credibility yet

a lone the worlds 1st reserve #FX launched in last 50 years is that it must maintain confidence of its domestic audience yet alone foreign CB's. The Euro suffered a terminal lack of both domestic support from inception which hangs over it today. You can see why Europe baulked at

Libra. Europe failed to instil confidence in the Euro began right from the get-go, and within a 18 months was 15% below its launch levels because many people held mattress cash unsure if it would be still born. G7 intervention was required G7 to save it a luxury China doesnt have

and more concerning the fact that it cant use the Fed Swap & Repo facilities to create a armoury of dollar's to fend off China's eternal problem with Capital outflows. As a side note this is why every rally in Bitcoin will be fought aggressively by PBOC. I've explained before the

in the period 2015/17, it was #Bitcoin popularity that led to DCEP's evolution because the PBOC were fearful of '' Yuan Sovereignty''. DCEP being a digital currency, would in the eyes of NDRC/PBOC counter no opposition / competition from a digital competitor that challenges DCEP

legitimacy. Thus every uptick in #BTC will be resisted and the much hailed halvening will be a complete failure with the caveat, that China is able to keep everything together, which brings me full circle to China's ultimate reason for supporting US stocks. It mitigates tail

risks that would sink its reserve currency ambitions. China has no other option. It cant devalue and it cant borrow dollars from the Fed. Buying US stocks gives China space to mitigate feedback loops that would undermine DCEP; those risks are collapsing global demand for China

export's, compounding the head long dive toward de-globalisation already in train after last years trade war, compounded by the effect that collapsing demand has had on the rest of Asia leading to weaker currencies but in turn hurting China a second time , helping those countries

steal a competitive march on China, while China has sail into the wind and try and keep its currency strong to avoid outflows which will undermine the DCEP project. Its doesn't stop at cutting off outflows ( #Bitcoin ) but DCEP was always dependent on the reciprocity generated

by China's Obor related cheque book reciprocity: '' we build your bridges and railroads, you buy our bonds'' thus appetite to buy China product (incl bonds & equities) after China's Wuhan actions might be curtailed, not withstanding the resulting drain in EMFX reserves spent

by those Asian nations in defence of their #FX which depletes from the pool of dollar's available to flow into China to support DCEP in any case.
See chart and previous tweets showing China's footprint.

As Ive highlighted China has been buying in Asia and are again today.