China quietly dumps $520 billion in reserves, probably Treasuries, in little over a year

Financial Times/Gabriel Wildau/8-2-2015

“Strategists led by Nikolaos Panigirtzoglou [JP Morgan] in London estimate capital outflows amounted to $520bn combined over the past five quarters. ‘The current capital outflow episode in China is a more sustained and severe episode relative to those seen in the past,’ they wrote.”

MK note:  Not widely reported, China’s $520 billion sale of reserves over the past 1.25 years is a big number. Some would call it a dump, probably of U.S. Treasuries, and an important indicator of a potential reversal in policy. The $520 billion represents about 15% of China’s peak $3.99 trillion in reserves. Goldman Sachs analysts looking at the same situation said, “But even if we adjust for these factors, net capital outflows might conceivably have run around -$200bn, an acceleration from Q1 and beyond anything seen historically.” And TD at ZeroHedge added this:  “Granted, this [Goldman’s $200 billion] is smaller than JPM’s $520 billion number but this also captures a far shorter time period. Annualizing a $224 billion outflow in one quarter would lead to a unprecedented $1 trillion capital outflow out of China for the year.”

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