I’m a person that likes analyzing econometric flows, such as, ‘Purchasing Price Parity’ and the debt and currency flows thru the global markets. I find them interesting and procedurally useful for ‘Inter-Market’ analysis.
I find China very interesting at this point, but, confusing. Since they have a pseudo ‘peg currency’ it is difficult for someone at my level of available information to get a handle around the capital flow. On one hand China is now financing Canadian pipeline projects, in addition China, Brazil and Australia are supplying capital support to ‘Euro Zone’ members (resource trading partners). On the other hand where is this capital coming from. It has to be US$ or Euro$ based (I would think). So I suspect they were liquidating some of their sizable holdings of US Treasuries to the ‘Central Banks’ and debt market investors appetite for buying them over the course of the last year (or so). I think that scenario explains the relative limited success of ’Operation Twist’.
With a floating (non pegged) currency it is easier to correlate the expected result of a ’Central Bank’ monetary easing. With China’s pegging and lack of informational transparency it is an even ‘larger estimated guess’. In short I am intimating that China’s cut may not provide much country stimulus. No matter what the effect is going to be allocated between country monetary stimulus and their ‘International Capital’ transactions.
I have started analyzing the newer local currency ETFs to try to gain some insight. Hoping to find some cloud clearing in their information since China’s Central Bank actions are a mumble-jumbo.