Considering Chinese Demand

Thu, Jun 13, 2013 - 1:36pm

It's one of those things. You hear about it every day but never stop to really think about it.

This began as an email discussion with my friend, Ned, yesterday. All of us in Turdville are aware that the Shanghai Gold Exchange has physically delivered something like 1200 metric tonnes of gold, year to date. That's a staggering number and it far exceeds the amount delivered through London and dwarfs the level delivered through the Comex. Prior to yesterday, I looked at that number and thought, "Wow. That's a lot.", but I never stopped to ask the follow-up questions:

  1. To whom is this being delivered? AND
  2. Once it's delivered, where does it go next?

Let's start by looking at this handy chart. Note that, at this current pace of delivery, Shanghai is currently delivering each month the entire global mine supply. No wonder they were temporarily "out of stock" back in May! How long can this continue?

OK, now for some additional background. Recall that, since about 2006, the Chinese government has been aggressively promoting gold buying by its citizens. This campaign really began to pick up steam in 2009 following The Great Western Financial Crisis. A quick Google search returns all sorts of articles which describe this policy. Here are just a few examples: gold-analysis?oid=88452&sn=Detail & & &

We also know that officially reported Chinese imports are soaring. In just the first four months of this year, China has imported through Hong Kong nearly 500 metric tonnes of gold. This adds to the 834 metric tonnes that they imported in calendar year 2012.

(Charts courtesy of ZH)

So where is all this gold going? I first wrote about it nearly a year ago. Much of it is being recast into kilo bars that, I believe, will ultimately be used to provide a hard asset backing to a future Yuan.

But that still doesn't explain the almost-daily, 15-25 metric tonnes of physical delivery in Shanghai. This is why Ned and I were so perplexed.

So, next, I did what any sensible person would do, I rang up Andrew Maguire. His decades of experience in working the international wholesale market makes him the best source I have for answers to these questions. The conversation went something like this:

Me: "Andy, where the heck is all this gold going?"

Andy: "It's not going anywhere."

Me: "What do you mean?"

Andy: "I mean exactly that. Shanghai settles all that bullion each day to domestic wholesalers. That metal is then shipped off to Chinese dealers and refiners for domestic consumption."

Me: "So wait a minute. You're telling me that public demand in China is currently soaking up 250 metric tonnes per month or nearly ALL of the publicly-reported global mine supply?"

Andy: "Exactly."

And then I started thinking...Well how hard would that be to do? 250 metric tonnes is about 8,000,000 troy ounces. The current population of China is 1.344 billion. If only 25% of the population is taking their government up on the idea of gold ownership, that's 336,000,000 people or, roughly, an amount equivalent to the entire population of the United States!

So now let's say that these 336,000,000 people buy, on average, 1/40th of an ounce every month. That works out to be about 3/4 of a gram or about $35 worth at $1400/ounce. Working the math backward we get: 336,000,000 people buying .75 grams = 252,000,000 grams and 252,000,000 grams = 252 metric tonnes.

Hmmm. Well how about that? Makes you look at stories like this in a different light, doesn't it?

A crowd of customers waits in front of a gold store to shop during a promotion, in Jinan city, East China’s Shandong province on June 11, 2013.

People crowding around a gold products counter jockey for position to pick up something in a gold store which sold its products at a price of 299 yuan per gram in a promotion – about 50 to 70 yuan lower than the normal level, in Jinan city, East China's Shandong province on June 11, 2013. The promotion attracted nearly 10,000 people who rushed to the store despite restricting each customer's shopping time to 15 minutes. While gold markets in the US and Europe saw panic selling, China has just seen a surge in gold sales in the past few months. Chinese households came under the spotlight with their generous purchase of the gold products amid a global fall of the gold price.

OK, then. So, do you still think that the Spec Shorts are on the right side of the trade, that price is going lower and that the "bull market" in gold is over???

Hmmmm. Chew in that over the weekend and then come back for more on Monday. It's going to be another interesting week.


About the Author

turd [at] tfmetalsreport [dot] com ()


Jun 14, 2013 - 7:14pm

Re: Message board etiquette

It really is pretty simple. A message board is someone's personal property where they have invited you to a party...You follow their house rules and enjoy yourself, but you don't piss all over their house.

Jun 14, 2013 - 7:15pm

I hate to say it...

...but I am living proof that TF doesn't have a particularly itchy trigger finger, and is more than willing to tolerate dissent when it is presented civilly. No idea what this whole thing was about since I haven't checked the site in a couple days, but there it is.

AgNovice ¤
Jun 14, 2013 - 7:24pm

IP Addresses

For what its worth:

there are multiple people who reside and use the WiFi base station that is advertising this IP address to the world. I don't share my username and password with my family and friends who use my network, and I welcome, nay encourage them to follow TFMR.

Also, every time I unplug my router, it is possible for it to acquire a new address from Verizon.

And finally, I just switched off of Verizon (goodbye admitted giver of data) and onto Charter with a faster connection at a cheaper price. I'm sure they're probably giving "metadata" to the NSA too (Hi!), so they can map all of the changing IP addresses, ports and connections.

Jun 14, 2013 - 7:25pm

Many Thanks, Again, to Silvergunn...

...for this post a few days back:

Thanks to you, Silvergunn, I have PCGS slabbed, graded MS69 "First Strike" 1/10 ounce Au 2013 Pandas in my hands @ $140.57 net apiece.

And, for the record, the service at First Federal Coin Corp. was, dare I say, tits (i.e., very good, as in "to be desired", not to be confused with "tits up", which would be to say dead, or at least highly unresponsive).

I hope others were as fortunate, to see and react to the post.

Nick Elway tmosley
Jun 14, 2013 - 7:35pm

@tmos no "fact" that there is less silver than gold above ground

Sorry tmos, but it is more likely a MYTH that there is less silver than gold above ground.

Hagarth and Byzantium and I looked and I believe we agreed:

1.Silver is NOT scarcer than gold. If we use the consensus Gold-above-ground number of 166000 Tonnes and our number of 748000 Tonnes, then the ratio is 4.5 silver ounces above ground for every gold ounce above ground. For those that disagree with including silver jewelry and silverware in the silver total, please be reminded gold jewelry IS in the gold total.

We started doing the research because we wanted to believe, but you've got to buy into bix weir's secret above ground stashes or fulford's asian secret society(2000 K tonnes) to get "less silver than gold above ground" Even believing 60 K Tonnes of "Vatican Gold" is not enough.

Jun 14, 2013 - 7:36pm


they forgot their password,

LOL, yeah, they can be tricky. lol.

Pro tip, write em down in text files upon creation.

Yeah!!! beatles BD!!! Speaking of Birthdays, LMAO

Its my brithday, LOL

Banned Commercial - Geico - Verne Troyer (Recommended)

Todays story: So a miner corps refinances, I guess, got not clue, but changed stock value, so, I get mail for the cert change, as I only own miners by cert in hand, so, as ordered, I send in the old cert for a new one, and I got the new by mail, but, along with it is an invoice for 10$, I guess to print or re-register, and I was thinking, I do that some times, no, really, the corps made the change, not me, and it was like depositing cash at a bank and getting charged for it, anyway, call them up, a transfer agent, as said something to the effect, I am sure your management dose not want to hear me barking on the phone for months, using every polite name in the book, as always, and asked to have the 10$ fee waived, .... and it was, with only one phone call, they just dont know how to have real fun. So, another one of those big problems in life solved, just cookies. LOL!!! The lady was to just to polite and accommodating, go figure. LOL

Mr. Fix
Jun 14, 2013 - 7:44pm

Happy birthday Turdville

I had not noticed, but happy belated birthday to me too, it's been one year and five days.

Maybe I should stop feeling like a newcomer by now.

Mr. Fix


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Jun 14, 2013 - 7:46pm

Happy Birthday TFMetals Report

Space shuttle Columbia on the left and probably Atlantis on the right back in the day when the United States of America actually launched two crews to space within 90 days.

We can't orbit a crew without the Russians letting us hitchhike a ride for $25,000,000 dollars per seat.

Meanwhile China is using 30 year old technology and putting a 3 person crew up to their space station.

The Chinese are executing missions similar to the Soyuz-Salyut missions from the early 1970's.

nice video of the Shenzhou-10 launch here:

Launch of Manned Chinese Shenzhou-10 Spacecraft

Despite my interest in spaceflight, I somehow never saw this remarkable video from 9-27-2008 (prior to the election of President Obama). The story must have been buried by the US national media due to campaign coverage.

Strongsidejedi Strongsidejedi
Jun 14, 2013 - 7:51pm

China waves its flag in space

This video is from 4 1/2 years ago.

Somehow, did this video escape the media's attention due to the concurrent 2008 election?

Do not discount or belittle a program that can pull these things off.

The CCTV commentators repeated that China will launch a larger space station in 2020. That would time the Chinese new space station to the same time that the International Space Station program reaches its design age limit.

If you think this is off topic, please review this video done by Peter Navarro 5 years ago.

Coming China Space Wars -- Navarro's China Effect
Jun 14, 2013 - 7:51pm

Happy Birthday Turdville!

Step #1

Step #2

Step #3

Be very careful who you take home...

tmosley Nick Elway
Jun 14, 2013 - 7:54pm

Dunno, Nick.  Silver jewelry

Dunno, Nick. Silver jewelry gets thrown away. Gold is kept or recycled.

Also, your numbers are wildly different from what I have seen in the past. Last I heard, there was about a billion toz silver above ground and falling fast (this was as of the mid 2000's). For reference that's about two years of industrial demand.

I'll peruse your numbers a bit more and find my old source (I think it was Ted Butler) and see what's up.

Jun 14, 2013 - 7:54pm

Angela, The EU & It's Youth Under Pressure

Under Pressure

Angela Merkel's advice for Europe's unemployed: move

Germany's chancellor Angela Merkel has a simple message for the millions young people in the eurozone who are out of work – move.

German Chancellor Angela Merkel. Photo: MICHAEL SOHN/AP

3:29PM BST 14 Jun 2013

In an interview, Mrs Merkel said the high levels of youth unemployment in Europe represent a "huge crisis", comparing the eurozone's difficulties with post-Communist eastern Germany.

Speaking to the BBC, she said that when unemployment soared after the fall of the Berlin Wall, "many young people ... only had jobs because they moved to the south." Mrs Merkel said: "I think it's unfair that it is the young people especially who have to pay the bill for something they didn't do.

"But there's no way around it. We have to manufacture products or offer services in Europe that we can sell."

Her comments are the latest indication of Germany's concern that the prolonged economic crisis in southern Europe is putting the European project under strain. Germany is seeking to attract more migrants from crisis-hit countries to meet its own shortage of skilled workers.

In the interview, the German chancellor emphasised the need for economic reforms that would make Europe more competitive rather than insisting on limits to government spending.

She pointed out that deficit-cutting targets had been relaxed, with France being given more time to gets its deficit below the European Commission's ceiling of 3 per cent of GDP.

She said: "With regard to jobs and growth, the eurozone and other countries are in a difficult situation. The issue is not austerity, the issue is to get back to growth.

"This process is under way. Europe has to decide: how do we make a living?

What do we want to produce? What do we want to manufacture? How can we cut red tape? How can we intensify trade?" Asked about her reaction to anti-German demonstrations abroad, Mrs Merkel said: "We have demonstrations not just abroad but also in Germany. As a government, as politicians, we have to accept that. I want these countries to recover quickly."

"You know as well as me that the European countries all agreed to the growth and stability pact. Nevertheless, we gave many countries the possibility to have a deficit above 3 per cent. France, for instance, but also Spain and Portugal."

Jun 14, 2013 - 7:59pm

Im not sure. but in terms of

Im not sure. but in terms of were the gold is stashed, it still me like silver is the better play.

166,000 x GSR at 62, means on dollar par, there should be 1,029,000 tons of Ag, and so its look presently that silver is short in supply on par, so on par, silver is the better play.

At that stated amount, the GSR ratio would be GSR of 4.5, YIKES, economic collapse, so maybe DOW/GOLD prediction of 0.4 was an huge over estimation.

But, there is no way the rich are is giving up those silver spoons, of 774,000 tons is way off.


But he is right, there is a general impression that gold is actually more plentiful than silver.

Jun 14, 2013 - 7:59pm

DPH, Mad5Hatter...

...are you guys asleep?

Very, very rarely do I post videos. Please, watch this:

Countdown Columbia

I remember that day, and I shed tears. I watch today, and I shed tears, but for a very different reason. Then, my choice was math or physics. Today, my choice is staying or leaving.

"Sadder still to watch it die, than never to have known it."

Jun 14, 2013 - 8:00pm

And in China...

China braces for capital flight and debt stress as Fed tightens

China appears increasingly worried that monetary tightening by the US Federal Reserve could trigger capital flight from the People’s Republic and set off a Chinese corporate debt crisis.

There have been signs of serious stress in China’s interbank lending markets, with short-term SHIBOR rates spiking violently. Photo: Alamy

1:50PM BST 14 Jun 2013

A front-page editorial on Friday in China Securities Journal - an arm of the regulatory authorities - warned that capital inflows have slowed sharply and may have begun to reverse as investors grow wary of emerging markets. “China will face large-scale capital outflows if there is an exit from quantitative easing and the dollar strengthens.” it wrote.

The journal said foreign exodus from Chinese equity funds were the highest since early 2008 in the week up to June 5, and the withdrawal Hong Kong funds were the most in a decade.

It also warned that total credit in Chinese financial system may have reached 221pc of GDP, jumping almost eightfold over the last decade. Companies will have to fork out $1 trillion in interest payments alone this year. “Chinese corporate debt burdens are much higher than those of other economies and much of the liquidity is being used to repay debt and not to finance output,” it said.

Source: World Bank; International Debt Statistics; World Development Indicators; IMF IFS (orange bars indicate low income countries)

Shibor one-week trend.

Shibor one-month trend.

There have been signs of serious stress in China’s interbank lending markets, with short-term SHIBOR rates spiking violently. Bank Everbright missed an interbank payment last week in a technical default.

“Liquidity conditions have tightened severely due to the crackdown on shadow banking activities,” said Zhiwei Zhang from Nomura. “We believe the series of policy tightening measures in the past three months have reached critical mass, such that deleveraging in the banking sector is happening. Liquidity tightening can be very damaging to a highly leveraged economy,” he said, warning that local government finance vehicles may have trouble rolling over debts.

China Securities Journal hinted that the authorities fear they have gone too far in their efforts to curb property speculation and off-books lending, and may have to turn the liquidity spigot back on.

“There is room to cut interest rates and the reserve ratio in the second half. A rate cut can help ease company debt burdens. A reserve cut can help cushion the monetary environment,” it said. The central bank has already cut the reserve ratio requirement (RRR) to 20pc for big banks, but this could go much lower.

Premier Li Keqiang has until now vowed to press ahead with loan curbs, insisting that the economy is strong enough to withstand the strain. The editorial is a clear sign that the Communist Party is preparing a volte-face, discovering that it is harder to manage a calibrated soft-landing than originally assumed.

Citigroup warned in a new report that surging SHIBOR rates will cascade through the banks and damage growth later this year, with knock-on effects for commodity prices and emerging markets worldwide.

Jun 14, 2013 - 8:01pm

“Right now, we can’t keep up with the demand ... in Asia"

Metalor Set to Complete Singapore Gold Refinery by Year-End
By Glenys Sim & Susan Li - Jun 13, 2013 5:36 AM ET

Metalor Technologies SA, based in Switzerland, expects to complete its gold refinery in Singapore by the end of this year as the country seeks to expand its share of global bullion trading.

The precious-metals processor cast its first one-kilogram gold bar in Singapore this week, Chairman Scott Morrison said. The $15 million refinery will have a capacity of about 150 metric tons a year, he said on Bloomberg Television’s “First Up” With Susan Li.

Gold slumped 17 percent this year, entering a bear market in April, as an improving U.S. economy spurred a rally in equities and undermined some investors’ faith in the metal as a store of value. Singapore removed a 7 percent sales tax from investment-grade precious metals last year in a bid to boost trading, while Deutsche Bank AG and JPMorgan Chase & Co. have opened vaults in the city. The plunge in April stoked a buying frenzy for bars, coins and jewelry from China to India.

“Right now, we can’t keep up with the demand in terms of investors in Asia purchasing gold,” said Morrison. “The amount of physical gold that is being sold to the investment community is quite substantial.”


Jun 14, 2013 - 8:03pm

No sleep for the weary...

...or for beacons of energy and thought....and frivolity.

I'm wide awake in the United states and it's 8:00 pm where I'm at.

Godsmack - Awake
Jun 14, 2013 - 8:03pm

@Nick RE: Ag/Au

I agree that it's highly UNLIKELY that there is more gold than silver. I like Bix and all, but I think he's partied a bit too much in Bizerkly...

Even if silver is 10X gold, then it should trade at 1/10 of gold price not 1/63. I tend to agree with Jim Rickards that gold needs to be $7000 minimum (instead of $1400) when adjusted for the new money supply so that puts silver at $700 (instead of $22). If the ratios are close (or better) then silver is at least 500% better investment than gold at these levels...

Jun 14, 2013 - 8:14pm

OK, Nick, on the first

OK, Nick, on the first reading of your post, I have noticed what appears to be massive bias in your source. He starts with all the silver (and gold) ever mined, and subtracts the amount "irretrievably lost" to get the current above ground supply. The problem with this is, of course, he doesn't and can't know where all the rest of the silver (and gold) has gone. If he misses a big source of usage, the number is screwed up forever. Was a bunch of it recycled by unlicensed smelters? Has it been sold to Chinese companies for use in manufactured products off books? The numbers in the west might be accurate, but I don't know how he could possibly know about what has been going on behind the iron curtain, in the Orient, in the Middle East, and in India.

Probably a more useful way to go about this (and I suspect the way my previous source went about it) would be to go about it in an additive rather than a subtractive fashion. You have set the absolute upper bound for the amount of silver above ground. The additive method would set an absolute lower limit (as there is an ill-defined amount of investment silver floating around out there). The reality would thus be somewhere between the two numbers.

Edit: It's funny to note that the worst/best case scenario you have laid out is still massively bullish for physical silver. I can't imagine how high the price would have to go to cause significant dishoarding in an individual basis to get all that privately held silver onto the open market.

Green Lantern
Jun 14, 2013 - 8:14pm

Re The Real Rocket fuel 3,2, 1 Take Off

Happy Hour Detour-Put a Little culture in your lifes.

I was giving some more thought to the plumeless Chinese Rocket and realized from my experience in the chemical business Strongjedi might be incorrect about the fuel combination. I have first hand knowledge that this stuff can blast you to the moon and back.

The poison of choice for Deng Xiao Ping. And it is said this stuff outsells Vodka. In 2008 with annual sales volume of 520 million 9-liter cases compared to vodka with 497 million 9-liter cases.

Wu Liange Ye:made from only the finest Proso millet, corn, glutinous rice, long grain rice and wheat.

You haven't lived until you've drank this stuff. I recommend you guys throw away your bottle's of rogaine and try this stuff.

This young lady seems to know the deal. You can tell she is an expert by the way she slurs her words.

五粮液 Wu Liang Ye: Chinese Liquor

However, if I were to choose a fuel that would at least equal it or maybe surpass it, this stuff might get you to mars and back. It would be Turkish Raki. (You Irish and Scotts drink kool-aide in comparison) Do not get into any drinking contests with Turkish women!!! You could die! I live to tell the story.

However, if I still chose to consume large amounts of pain killer and wanted to go out in style, screw the california, and Australia wines and yes, even those luscious french wines, fuh get about spending your last penny on a gold coin, if you wanna go out in style, my choice for the absolute heavenly ambrosia money can buy is this stuff.

When I was working for the man, we would spend Thousands in one night drinking this stuff in place that looked something like this.

Do not drink the warm stuff that tastes like glue, do you heat up your beer?

Kikusui Jinmai-Gold of the God's

I promise, you'll never drink Kendal Jackson again. Nobody has yet explained to me how the Japanese squeeze wine out of rice.

Jun 14, 2013 - 8:17pm

GL: Thanks for the info.  I

GL: Thanks for the info. I do love to drink warm sake, but I rarely buy the "good" stuff. I don't have the pallet to appreciate it. The only fancy stuff I can appreciate is scotch and bourbon, as those are my drinks of choice, and I have enough experience in them to get more out of the good stuff than the bad.

Jun 14, 2013 - 8:18pm

When the Levee Breaks / No Quarter

Video unavailable

Video unavailable

Jun 14, 2013 - 8:24pm


For some reason when I see that clip images of the Three Gorges comes to mind. (Not saying I want that to happen)

Jun 14, 2013 - 8:28pm

Kenny Rodgers

After the past couple of weeks I need me some Kenny Rodgers.

Kenny Rogers & The First Edition - Just Dropped In
Kenny Rogers & The First Edition - Ruby "Don't Take Your Love To Town"
Jun 14, 2013 - 8:37pm

Chinese reenter Japanese waters

"Chinese Ships Enter Waters Claimed by Japan

Japanese maritime authorities say three Chinese government ships have sailed into waters around disputed islands controlled by Tokyo, for the first time since late May."

I know we have seen this before, but since it hasn't happened in a few weeks I thought I would post it.

Jun 14, 2013 - 8:40pm

Happy Birthday Turd !

I ain't mad .... I'm just takin' a break .... LURKING .... ever try to stick a candle in a floating turd .... then light it .... then watch it roll over .... and extinguish itself .... me neither ! Monedas 1929 Comedy Jihad Birthday Blues World Tour

Jun 14, 2013 - 8:40pm

Three Gorges Dam Video

I hear what you're saying Sad_descent.

It's monumental undertaking and I fear one day that the Earth will reclaim it's land back. There's a reason why the convergence of that much water took place naturally in that area.

Video unavailable

The Three Gorges Dam project is hailed as a wonder by the Chinese regime, yet at the same time it's widely criticized for damaging the environment, submerging historical sites and forcing residents to re-locate. Now the company behind the project is planning four more dams on the Yangzi river, with work on the first two already underway.

The operator of China's Three Gorges Dam, the China Three Gorges Dam Corporation, is planning four more hydroelectric dams on the upper reaches of the Yangzi river. The new dams will generate a total of 43 gigawatts of electricity—twice what the current dam produces.

Construction started on the original Three Gorges Dam in 1993 and it started generating power in 2008. The project cost over 22-billion U.S. dollars.

Although the Chinese regime hails the dam as a wonder of the world, critics point out that the project forced 1.5-million people to re-locate and left countless historical sites in the Three Gorges submerged under water. In addition, experts have warned of the potential for mudslides and other geological problems due to the weight of the massive amount of water in the dam's reservoir.

Like the original Three Gorges Dam, plans for new dams have drawn criticism from environmentalists in China such as Yang Yong. Yang warns of several problems the new dams could lead to.

[Yang Yong, Environmentalist]:
"The danger due to the geology is very high, the geology on the section of the river where the hydro electric stations are located is extremely weak. The second overall characteristic is that they all have the issue of relocation of people. The third issue is the influence on the ecological environment, including changing the climate."

Even the Chinese regime admitted a month ago that the original Three Gorges Dam has lead to a host of problems that need to be urgently addressed.

But the China Three Gorges Dam Corporation defends the current and future dams. They claim on their website, their projects have established "A new ecological culture with a target of striving for man to live in harmony with nature." They also claim to have improved the lives of those who had to re-locate. However, reports suggest that many of those who re-located were left with no way to earn a living.

The first of the four new dams are planed to be completed in 2015, and all four are due to run by 2020.

Jun 14, 2013 - 8:41pm


If you have a Goldmoney account or any other foreign financial account you need to fill out an FBAR by the end of this month.

Jun 14, 2013 - 8:49pm

Asian Stocks’ Wild Ride

Asian Stocks’ Wild Ride

By Anthony Fensom

June 14, 2013


No one rings a bell at the top of the market, but has it already sounded at the bottom?

More than $2.5 trillion has been erased from the value of global equities since U.S. Federal Reserve chairman Ben Bernanke’s May 22 warning that its stimulus policy could be “tapered,” and Asian stocks have felt the impact.

In Japan, the money printing of Abenomics initially caused the yen to slide and the Nikkei Stock Average to outpace the rest of the world, posting an 80 percent gain since mid-November. But with the Tokyo bourse’s recent retreat along with the rest of Asia, the bears have returned.

On Thursday, the benchmark Nikkei lost over 6 percent to close at 12,445, down about 20 percent from its May peak over 15,600 and officially entering bear market territory. The fall was attributed to fears over the Fed’s policy, while analysts claimed a lack of detail in Japanese Prime Minister Shinzo Abe’s “third arrow” structural reforms.

"It's a kind of a chicken-and-egg situation – volatile markets keep buyers away and the absence of buyers leads to market volatility. We are trapped in a negative spiral right now," Daiwa Securities senior strategist Hirokazu Kabeya told AAP newswire.

The Hong Kong exchange is also in bear territory, with the benchmark Hang Seng Index falling to an eight-month low Thursday on worries over the Fed as well as mainland China’s economy.

In China, the benchmark Shanghai Composite Index reached a six-month low Thursday, with analysts concerned that weaker exports and inflation data could indicate a faster slowdown than previously estimated.

Singapore shares have also hit a six-month low, with the benchmark Straits Times Index falling below its value at the start of 2013.

In South Korea, the benchmark Korea Composite Stock Price Index (KOSPI) fell below 1,900 for the first time since November, with the nation’s central bank keeping its key interest rate steady at 2.5 percent.

Australia’s sharemarket has also entered into a “correction” after retracing most of its yearly gains. On Thursday, the benchmark S&P/ASX200 index finished the day’s trading at 4,695, down by more than 10 percent since its May high of 5,220.

World Bank cuts outlook

The mood of traders was not aided by the World Bank, which on Wednesday cut its outlook for global growth to 2.2 percent, down from its January forecast of 2.4 percent. The bank warned that a deeper recession in Europe and slowing emerging economies would ensure softer growth in line with the “new normal”.

The East Asia and Pacific economy is forecast to expand by 7.3 percent in 2013, rising to 7.5 percent next year. This reflects weaker growth in China, which is expected to expand by 7.7 percent in 2013 but accelerate to above 8 percent in 2014 and 2015.

“Risks to the region include those surrounding the gradual reduction in Chinese investment, Japanese quantitative easing, rapidly expanding credit, and rising asset prices,” the bank said in a statement.

Turnaround in sight?

Yet despite the gloomy scenario, positive U.S. data, including the biggest rise in retail sales in three months and fewer claims for unemployment benefits, have pointed to a brighter global outlook.

“At the end of the day, the policymakers are going to re-stimulate if they think the economies are slowing, so there’s sort of a catch here in that the market corrects too far on the view that stimulus is being pulled back, and the only reason stimulus is being pulled back is because economies are doing better and earnings are going to be doing better,” BT Investment Management’s Crispin Murray told the Australian Financial Review.

Mitsubishi UFJ Morgan Stanley Securities’ Glen Wood told CNBC that he expected the Nikkei index to reach 20,000 over the year ahead, based on Abenomics reforms.

“A lot of the global long-only investors are still underweight Japan…and we need to see specific plans coming from the government,” he said. “But it’s a long-term story here, and we’re talking six, 12 to 18 months [and] moving to a weaker yen…so if I was a long-term fundamental investor I’d be looking at this as a buying opportunity.”

US billionaire investor George Soros has reportedly re-entered the Japanese market, after scoring gains of more than $1 billion previously on bets against the yen and Japanese stocks. “Buy when others are selling” may be an old mantra, but the return of foreign investors could herald brighter times ahead for markets.

Jun 14, 2013 - 8:52pm


No doubt it was an incredible engineering achievement, but I am afraid it is one of those things that will be looked back on with regret.

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6/5 10:00 ET ISM Services PMI
6/6 8:30 ET US Trace Deficit
6/7 8:30 ET BLSBS
6/7 10:00 ET Wholesale Inventories