The Hang Seng’s “Minsky Moment” is a stark reminder of how vulnerable markets are positioned, relative to valuations.

Yesterday’s 552-point heavy volume sell down in the PM session was entirely news driven. China’s top banker-Zhou Xiao Chuan- warnings of “asset bubbles, and high debt risks” plainly brings to the surface what many analysts and strategists have highlighted previously.

What has come as a surprise is the tool of choice employed in the Central Banker’s latest approach- moral suasion. Whether this reflects the lack of new policy tools, or more importantly a precursor before activating further “weapons of mass capital markets destruction”, only time (and capital markets attitude) will tell.

That said, no one can blame any spectators for being confused. Just last month the message sent by this same agency suggested a hint of an “expansionary tone” when Chinese banks were allowed a RRR cut. Last night’s warning went clearly against this grain.

As always, American Stock Markets saved the day by closing positive (Dow Jones and S&P) after initially reacting to the Chinese hiccup at the opening. This morning the HSI is echoing the overnight calm with a slight rebound, led by the usual suspects of biggies like Tencent (700 HK) and Chinese Banks.

The jury is still out, on whether this is the calm before the storm?

 

 

 

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