What’s The Best Way To Short China?

What’s The Best Way To Short China?

Read more from The Macro Tourist Global risk markets have recently taken comfort in the Fed’s change of rhetoric along with Mario Draghi’s talk of pulling out the “monetary toolbox”. When combined with the Chinese government’s cutting of the reserve requirement ratio and other stimulative measures, it’s easy to see why sentiment shifted this month. Yet the headlines out of China are getting scary. This morning Bloomberg reported on a special message from the Chinese leader.
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10 thoughts on “What’s The Best Way To Short China?

    1. …Trump has already tried.

      Problem is a huge part of his base depend heavily on Canadian trade, so his attempts at isolating Canada were a flop. Everyone knows that the US and Canada have one of the important bilateral relationships on the planet. There’s no way Trump could go after Canada in a serious way without causing serious harm to the US itself.

      Republicans know this as well. I suspect when he tried to go after Canada, he couldn’t get any support. No support from his base, so support from Republicans, and common sense finally sunk into is his very large brain. (And subsequently leaked out with nothing to hold onto)

      Canada will be safe from this moron.

  1. Kevin Muir has suggested this trade before. I thought he was early last time, but I think he’s right on this time. The impacts of slowing Chinese economy will definitely spillover to Australia, and I think his T+1 timeline makes sense. This is a good long term play. Especially with Canada opening up it’s energy market to Asia (finally…)

  2. This is a super-risky trade, period. Yellen has already jawboned for expanded macroprudential regulatory tools which can easily be interpreted as intending to bolster overseas dollar reserves for foreign central banks and enable their currencies greater purchasing power for US exports.

    And no I wouldn’t short the dollar any sooner than the yuan either. The big picture isn’t a currency story, as both China and US currencies are very well respected internationally, and the big picture isn’t even an energy resource story anymore (oil glut, renewables including nuclear power, etc.). It isn’t even a food story anymore. It’s purely a political story now, which means the trade du jour is sovereign debt vs. corporate debt IMO

  3. Conceding I am an idiot, I do not understand how anybody would make money on this particular trade. I understand the use of proxies, but there are not only bilateral reasons for AUD/CAD to fluctuate, but the Australian dollar and the loonie also trade against over 150 currencies. If the Aussie dollar sinks against the Canadian one, but is resilient against China’s currency, or America’s, or Botswana’s or whoever, then either people will purchase more Australian dollars with Canada’s currency and re-achieve equilibrium, or will use another currency to arbitrage the difference away.

    I can understand shorting a currency against a basket of currencies, or against the USD, or in an important bilateral trading group like the Euro-Pound, but this narrow path seems like an easy way to get your teeth knocked in.

    1. Think about it, essentially you’re implying that either currency is somewhat fixed in global markets, but they are floating. The trade is AUD will drop relative CAD, but it also implies it will be weaker vs other currencies as well. Algo firms will arb the difference across currency pairs so fast you won’t even see it, but that means nothing wrt long term trends.

    2. long CAD vs AUD is like saying long CAD vs USD and long USD vs AUD. In fact if your broker doesn’t offer the pair CAD/AUD you can create it synthetically the way I indicated.
      For instance if you think CAD/USD remains stable then you can simply go long USD/AUD

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