Hi Timber,
"They may have been selling since then, but based on price movements in US treasuries, any Chinese selling of US Treasuries is not having much impact."
After pondering further, I wonder if this can be explained by the fact demand from UST's would have gone up during the market correction, off-setting any selling by the Chinese. Stability in rates would be far more important to the Chinese than US stock prices. Is it possible China sold shares to create demand for bonds to which they also sold into? (ie maintaining stability in UST yields and supporting their currency at the same time)
Regardless, it seems to me the key question is what is fair market value for CNY? If it has a lot further to fall or if they deem it requiring further to fall to stimulate the economy then their FX reserves will continue to fall. Regardless of which assets they chose to sell, this is going to create volatility. Presumably if they have been selling risk assets first then stocks may have further to fall?
Thoughts?
The Big Boys, page-260
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