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Draconian rhetoric leaves Chinese stocks unimpressed- USD/CNH holds 7.20

Yesterday the Chinese authorities again warned investors about selling their own stocks and that was not the first time such warnings have been uttered. They also looked to move against hedge funds deemed to have been breaking the rules in that regard. Of course any action in that respect may well be justified, if the law has been broken. That said, the gains across the Chinese stock markets were pretty tepid today. So, the trend of Chinese stocks remaining under significant pressure remains intact. The fact that the PBOC has been actively intervening to stem the rise in the USD/CNH is also something to note. You see, if Chinese investors want to sell their own stocks and invest overseas, they will need to sell the Yuan. That outflow explains why the USD/CNH has for weeks/months thwarted any attempts by the PBOC to send the dollar lower. It has dropped back today and that fall closer to the 7.20 handle has come alongside a rise in the Yen, as noted here earlier. The question is; will that be sustained? There is much to say about that, but the connection between the USD/CNH price action and the record gains in the likes of the DAX, Nikkei 225 and Nasdaq 100. That should not be overlooked, if one is looking for clues, to see if the Chinese demand for foreign stocks might show signs of abating 

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