E The Market For Non-US Stocks Is Moderately Upbeat

Friday the US stock market did not close early. We saw what that can do on the Eve of Christmas and New Year last year.

In fact, ahead of a 3-day weekend, the market for non-US stocks is moderately upbeat, helped by the theory that some of the impasses the US and other economies have fallen into are intolerable. These include Brexit or Chinese tariffs; whether investigation of Pres. Trump can continue or his fixation on the wall and resulting government shut-down; talks with North Korea and China or the Hong Kong Stock Exchange's ability to tolerate fraud and fake news. The blockages are so idiotic that markets are now optimistic that they will be resolved.

My blog today will focus on the last of these hopeful changes. Despite the boost to the financial system by the People's Bank of China (the central bank) further pumping out money to lend to businesses, a second day when over a dozen fraudulent companies listed in Hong Kong saw their stocks fall 70% to 90% shocked China's offshore market. On Thursday thanks to US short-seller Bonitas Research (Matt Weichert) some US$4.77 bn in the valuation of Hong Kong firms was wiped out.

Friday dozens more resigned from the boards and management of fake firms, while others were simply sacked. Today over US$12 bn more in valuations of Hong Kong-listed firms disappeared in a matter of minutes right before the closing bell. Capital reorganizations were rife and weird firms announced new issues of debt and equity. Others which had planned share offerings suspended or canceled as the regulators belatedly cracked down. It is worth noting that the stock of the Hong Kong Exchanges & Clearing Ltd wound up fractionally. The Hang Seng index, which is for real companies, gained 1.25%.

We owe this cleanup to the impact of US short sellers who for years have warned investors about Hong Kong hanky panky. The real impact was on China, already troubled by slow growth and trade war, plus Western security bans on some of its leading exporters.

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