China is hiding its foreign reserves. Where does he hide them? As? And why does this happen? These are the questions that José Luis Cava is trying to answer today, who explains China has immense potential to generate foreign exchange, Its trade surplus is estimated at $0.4 trillion per year, “The logical thing to do would be that if the Central Bank of China receives $0.4 trillion per year, the most common thing would be to gradually increase the foreign exchange balance. However, this is not the case.”
This graph shows how the forex reserves remain stable and stable. Because Why doesn’t the balance increase? “On the one hand, because a part is being invested in the Silk Road, and the rest is hidden.” Where and how do they hide it? As experts point out, What the Chinese Central Bank does is invest in China’s sovereign wealth fund, so that foreign exchange reserves are no longer listed in the Central Bank of China. And so it does not declare them. “It is also investing a huge amount and lending it to Chinese public sector banks.”
In this way, they leave the balance sheet of the Central Bank of China and go to the balance sheet of these state-owned banks. “Of course, we no longer have control over this, as China’s central bank no longer has to declare these foreign reserves and we have no information about where state banks invest this money.” That’s why analysts are clear about the reason for all this, because China does not want us to know what it does with its foreign exchange reserves. And why don’t you want us to know? ,Most likely, you are investing this money in the economy of a country that is not exactly a strategic friend: the United States.,
So, the conclusion that Cava reaches is probably, He’s buying US bonds and investing in US companies, For this reason, experts highlight what the Financial Times says today about Janet Yellen’s visit to China. “Yellen has promised China that she will not place stronger controls on investments made in the United States.” And what in return? As the analyst argues, In return they are buying US bonds, “which is the main problem with the financial system at the moment,
With regard to the S&P 500, first of all, experts remind that on Wednesday we will have inflation data from the US, which may affect the short term. Jose Luis Cava shows us how the index got back to 4,383, And it has resistance in the 4,440 area, “We’re going to consider the most likely scenario that during this week, or two days, it will move sideways between 4,490 and 4,383.” Because Very simple: because A huge amount of about 4,400 gammas stick together, and this has a stretching effect From the S&P 500 price to the exercise price where Gamma is centered, 4,400. And the range is also a bit positive”.
For this reason, the analyst believes that there will most likely be sideways movement for Monday and Tuesday, but “we will look to the short side” if the 4,383 area support is broken. We will wait for the decline, rebound and in the subsequent decline we will open the first short position”, he concluded.