EM ASIA CREDIT: China Vanke: New shareholder loan

Bitcoin had a range Friday night of $104 915k - $122 571k, Asia is currently trading around $115 480k, +0.40%. Bitcoin capitulated as risk took a big hit as tensions between the US and China were reignited on the back of new rare earth controls. Over the weekend both sides have tried to placate markets, the Chinese by explaining the new controls are neither a prohibition nor a ban. The US have walked back some of their aggressive posturing in response and JD Vance said President Trump is willing to be a reasonable negotiator with China. In what has been described as the worst liquidation event in Crypto history after dropping almost 15%, Bitcoin found bids in its support area between $100-$108k and has since bounced 10% recovering a large part of Friday’s losses.

• With a lot of leverage having been wiped out on this move the bulls will now say it can move higher from here, but historically when we have an unwinding of such large positioning it can dent the markets confidence, so perhaps the market looks to consolidate within its $100k-$125k range until we get a better idea of how these new export controls will impact the US and what their counter measures might eventually look like.
• CoinDesk wrote a Bitwise portfolio manager estimated roughly $65 billion in open interest was erased, resetting positioning to levels last seen in July.
• Dr Martin Hiesboeck speculated on X that it looked like a targeted attack: “The crypto market crash on October 11 is suspected to be a targeted attack that exploited a flaw in Binance's Unified Account margin system. The attack was timed to exploit a window between Binance's announcement of a fix and its implementation. This event highlights critical risks in exchange collateral policies and risk management.”

Fig 1: Bitcoin spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

European natural gas fell 1.4% to EUR 31.905 on Friday after a high of EUR 32.363 at the start of the session. Prices are up 1.6% this month and with storage 83% full and flows into inventories continuing the market is content to monitor the situation and the outlook for heating demand. However, at the same time last year, levels were around 92%. 

• Europe is benefiting from China’s purchases of Russian gas leaving it to buy from other suppliers.
• US gas prices fell 4.2% to $3.133 on Friday to be down 5.6% in October. Mild weather and a larger-than-expected storage injection have pressured prices since Wednesday. Heading towards winter, the market will continue to focus on weather forecasts and supply developments.
• Lower-48 US gas production rose 5% y/y while demand fell 6.7% y/y. Flows to LNG export facilities rose 1.6% w/w on Friday, according to BNEF data. 

US-China trade tensions have come back into focus, as Trump threatened a 100% tariff on China by Nov 1 late on Friday. Focus is what steps may come next from the China side, with US comments over the weekend and today suggesting some softer rhetoric. Interestingly, Arnaud Bertrand wrote a thread on X expanding on an explanation he had heard given by a Chinese analyst about the timing of these new export controls on rare earth materials. Below are some key excerpts. A key takeaway is that if China is comfortable with its reduced dependency on the US, it may mean de-escalation has to come from the US side rather than China. 

• “Why did China wait until now to use rare earths as leverage against the US? Why not in the first Trump administration when the US started the trade hostilities? Or when the Biden administration unleashed the chips export controls 3 years ago?”
• “A Chinese analyst unexpectedly says a big part of the explanation is... helium. Source https://t.co/eUbbU5QIHW “ “All the way until 2022 China imported 95% of its helium and most of it was controlled by the US. 
• “In a nutshell what he's explaining is that with helium the US had an even stronger card to play if China ever used the rare earths card.”
• This raised huge alarm bells inside China.(https://t.co/eZhyv438LK).
• “By the end of 2024 China had cut its helium dependence on the US to less than 5% (https://t.co/wOxm8VRZJj).“China is the first country that systematically worked to eliminate every single pressure point, with humongous efforts. It's not just helium: it's chips, energy, telecommunication, pharmaceuticals, etc.“
• China also noted over the weekend that its rare earth export controls were not a ban or prohibition.