Wednesday, April 20, 2016
The Economy: "Chinese Quietly DIVESTING from US Stocks & Equities"
"Chinese Quietly DIVESTING from US Stocks & Equities"
What do foreigners know that Americans do not?
Post by U.S.Reporter
"The Chinese move, ranging from individual investors to corporate entities, into overseas real estate, particularly in West Coast cities in the US, in Vancouver and Toronto in Canada, but also in trophy cities in Australia, New Zealand, and some other countries, has become legendary. More recently, Chinese companies, supported by state-owned banks and PE firms, have pushed into global M&A on a large scale, including in the US, buying companies lock, stock, and barrel. But at the same time they’ve been dumping US stocks and bonds.
They’re following the Chinese government, which unloaded $510 billion of foreign exchange reserves in 2015, including $292 billion in US Treasuries, the first ever annual net sell-down, after having religiously piled them up year after year. China still holds about $1.4 trillion in US government debt. So it has a lot left to sell.
That can no longer be said for Chinese holdings of US stocks. From 2008 through the first quarter of 2015, China bought $117 billion of US stocks, riding the big Fed-induced bull market to its peak. Q1 of 2015 was particularly strong, with $20 billion in share purchases. But in Q2, Chinese investors dumped a net of $14 billion of US stocks; in Q3 $34 billion; and in Q4 they threw another $68 billion out the door, according to a note by Goldman Sachs, reported by MarketWatch. In total, they sold $116 billion in shares over the last three quarters of 2015! Is this why the market peaked in May 2015? Because by that time, Chinese investors had switched from buying to selling?
From all the stocks they’d accumulated since 2008, a total of $117 billion, they’re now down to their last $1 billion. Of all the purchases since 2006, they only have $25 billion in US equities left. To top it off, they also sold $130 billion of US corporate bonds last year. Not exactly a vote of confidence in US stocks and bonds, especially since the Chinese are moving so much money into the US to buy real estate and entire companies.
Other foreigners too lost confidence in US equities. And oil producers – budgets mauled by the oil price plunge – also unloaded US stocks:
• Canadian investors dumped $80 billion in US stocks after having been loyal buyers for many years. They still have $102 billion left to sell.
• The Middle East unloaded $39 billion in US stocks, after having already dumped $20 billion in 2014 and $22 billion in 2013. Their holdings are down to a measly $33 billion.
• Europe sold $24 billion, and still has $556 billion left to sell. If Europe gets more nervous about US stocks, watch out!
• In total, foreign investors unloaded a net $171 billion in US equities. And they may lose whatever is left of their appetite for US stocks if China continues to rattle everyone’s nerves, and if the dollar continues to rise.
What do these foreigners know that Americans do not? Well, they see that price-to-earnings ratios for US stocks are completely out of line with reality; stocks are grossly over-priced compared to earnings. They see that most of the increases in US stock values have come not from market investor demand, but rather from companies buying back their own stocks! They see the US federal reserve printing money to buy stocks through their "plunge protection team (PPT) to falsely inflate falling markets. Put simply, US stocks have become somewhat of a fraud - and foreigners are not buying-into the hype and rhetoric. They know what's coming: Collapse.
But because the US mass-media is derelict in its duty to report truth, Americans will be totally blind-sided when everything goes to hell later this year. Pensions and IRA's will be wiped out and stunned Americans will have no idea how this happened. Will YOU be one them?"