Tuesday, 28 July 2015

Stock market plunge in China may have "profound impact" on economy

After plunging 8.5 percent on Monday, there could be more losses to come for the Chinese stock market. From Bloomberg:

Chinese stocks will decline by an additional 14 percent over the next three weeks as the market demonstrates a trading pattern that mimics that of the U.S. crash in 1929, according to Tom DeMark, who predicted the bottom of the Shanghai Composite Index in 2013.

Bank of America strategist David Cui also thinks that there could be more falls for Chinese stocks. This would the result of excessive leverage, which "means relentless selling pressure", and that "A-shares ex. banks could at least halve".

Cui concluded that "what just happened in the A-share market will likely have profound impact on China’s economy and financial system".

Monday, 27 July 2015

Chinese stocks plunge

China’s stock market plunged on Monday.

The Shanghai Composite Index fell 8.5 percent to 3,725.56 at the close, the biggest decline since 27 February 2007.

Recent economic data from China had been negative.

On Monday, a report showed that profit at China's industrial firms fell 0.3 percent in June from a year earlier, reversing a 0.6 per cent rise in May.

Data on Friday showed that China's factory sector contracted the most in 15 months in July as shrinking orders depressed output.

In recent weeks, China's stock market had been recovering after sufferring heavy losses in June and early July. The Shanghai Composite Index fell by a third in the latter period but had rebounded 16 percent since the low on 8 July.

Tuesday, 21 July 2015

European stocks in favour after bailout deal

In the wake of the bailout agreement for Greece last week, Goldman Sachs has upgraded its view on European stocks.

"European equities have been one of the key asset classes to benefit from a fading of Greek risks following their drawdown," Goldman Sachs wrote in its Global Opportunity Asset Locator report published on Monday.

It upgraded its three-month view on European equities to "overweight" while downgrading US stocks to "underweight". It expects the STOXX Europe 600 to return 1.9 percent, 5.1 percent and 12.9 percent in local currency terms on a three-month, six-month and 12-month basis respectively.

The Bank of America Merrill Lynch Fund Manager Survey for July published last week also found that views on European stocks were positive. "Despite the Greek news flow, intention to own European assets is high and rising, though global growth remains vitally important for European stocks," said Manish Kabra, European equity strategist at BofA Merrill Lynch Fund Manager Survey.

Still, economists remain pessimistic about Greece's ability to stay in the euro group. A Bloomberg survey of 34 economists showed that 71 percent of them think that there is still a danger that Greece will be forced out of the euro region by the end of 2016.

Monday, 20 July 2015

Greece to repay creditors

Greece's bailout agreement last week has given it a chance to make payments to its most important creditors. From Bloomberg:

Greece gave the order to repay 6.8 billion euros ($7.4 billion) to creditors after last week’s tentative bailout deal, the Finance Ministry said, as Greek banks reopened three weeks after closing to prevent economic collapse.

The payments ordered Monday by the Greek government include money owed to the European Central Bank, the International Monetary Fund and Greece’s central bank, said a Finance Ministry official who asked not to be identified in line with government policy. Greek financial markets remain closed, the country’s market regulator said in an e-mailed statement.

Wednesday, 15 July 2015

China maintains growth rate but stocks slump

China's economy grew 7 percent in the second quarter from a year earlier, the National Bureau of Statistics reported on Wednesday, the same rate as in the first quarter.

The news failed to boost the stock market though. The Shanghai Composite Index fell 3.0 percent, declining for the second consecutive day.

Analysts remain optimistic on the Chinese stock market though. About 60 percent of analysts surveyed at 19 Chinese brokerages and asset management companies expect A shares to gain in the third quarter, the Shanghai Securities News reported.

Tuesday, 14 July 2015

Greece agrees to bailout deal

A bailout deal for Greece was finally agreed to on Monday. Bloomberg reports:

Prime Minister Alexis Tsipras surrendered to European demands for immediate action to qualify for up to 86 billion euros ($95 billion) of aid Greece needs to stay in the euro.

After a six-month offensive against German-inspired austerity succeeded only in deepening his country’s economic mess and antagonizing his European counterparts, there was no face-saving compromise on offer for Tsipras at a rancorous summit that ran for more than 17 hours.

Implementing the creditors' demands will not be easy though. The Greek parliament will have to pass into law key creditor demands, including streamlining value-added taxes, broadening the tax base to increase revenue and curbing pension costs, by Wednesday. Another Bloomberg report says that Tsipras is already facing mutiny at home over these demands.