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.

A year after the last big Chinese sell-off another one took place today. Already in 2018, Chinese shares did even worse than those listed in Hong Kong.

One reason is that China's Supreme Court authorized the Shenzhen bankruptcy court to look into Mainland business which are involved in commercial disputes, bankruptcy, or money laundering either directly or indirectly via Hong Kong. Under Hong Kong rules, there is no disclosure over the use of shares they own by controlling shareholders and of cross-shareholdings. But Shenzhen courts get the information.

While I oppose any crackdown on independence in the former British Crown colony, we have to be realistic. Using Hong Kong subs to hide Chinese assets so the parent company can declare bankruptcy and move its funds or assets out of China is a crime, not a civil rights issue. Hong Kong and China signed agreements on civil and commercial cases and recognized each others' insolvency orders.

After markets closed, the Chinese negotiators came up with a plan to boost US imports to eliminate our trade deficit over the next 6 years.

This is in preparation for the opening on Monday in Shanghai and Shenzhen which barely registered the last 20 minutes' trading today in Hong Kong, as well as a sop to the deficit-hating US president.

While we have more news from Hong Kong and China today, most of this issue is about the rest of the globe. But of course, talk of a China trade deal boosted markets overall.

*Beleaguered Tencent is plotting to buy NXC Corp., a holding company which controls two South Korean game developers owned by its sub-Naxon. Reuters writes that TCEHY is seeking US private equity partners for a bid around $9-10 trillion (US$7-9 bn) won to buy out NXC's 98.64% shareholder Kim Jung-Ju. Kim wants to sell. This has naturally boosted Nintendo up another 3%.

*TCEHY also gained, and this spilled over to Wall Street where the share is up 2.5%. Other solvent Chinese firms like Hollysys, HOLI, up nearly 5%; China Eastern Airlines, CEA, up 2.25%; China Mobile, our newest buy, CHL, up 0.9%. Hong Kong-listed insurance firm AIA Group, AAIGF, did not trade despite it getting an AA rating overnight from S&P for its reinsurance arm.

*Intrepid readers may want to dip their toes into Hong Kong-listed stocks with ADRs today. My best idea is Hang Seng Bank, a 62% sub of HSBC, keeper of the index, which lost ~0.5% over the past 2 days. The Hang Seng is a free-float capitalization-weighted index which has been operated since starting at 100 in 1964. It has nothing to do with the bank's own solvency but they are often confused. HSNGF trades OTC and as 11 in Hong Kong. It is trading at US$22.71 ask and I bought today with e-trade, the most difficult stock purchase I ever made. The market maker briefly tried to get $24 which of course I rejected. It pays a dividend of over 31% because of the mess in Hong Kong. It has not cut its interest rates except when the Fed does.