Financial Services Talking Points 17-12-2015

financial talking points


Trade-weighted index to keep yuan stable

China aims to maintain a stable yuan by valuing it against a basket of foreign currencies to create a flexible exchange rate system, rather than pegging only to the USD. The People’s Bank of China has released a trade weighted index, with the US dollar, euro and the Japanese yen making up the largest components. “What the launch of the TWI should make abundantly clear is that ‘yuan stability’ must now be read as meaning stable in TWI terms” said a note from Netherlands-based Rabobank. This was referring to confusion stemming from the yuan’s depreciation against the US dollar. Click here for full article.


RBA upbeat about the economy

Despite a budget deficit blow-out and growth forecast downgrades, Reserve Bank governor Glenn Stevens has issued an upbeat appraisal of the economy and downplayed the need for more official rate cuts. Genuine jobs growth, as well as the lower exchange rate helping Australian exports, is giving indications that the economy is transitioning well after the end of the mining boom, despite growth being slightly lower than expectations. “So, yes, growth has been a little lower than we thought. It hasn’t been as low as many people feared, I must say,” said Mr Stevens. Click here for full article.


Australian stocks close higher

The Australian sharemarket ended the day more than two per cent stronger, as high yielding blue chips took advantage of a respite in global markets. Energy and materials stocks benefited from oil and iron ore price rises, as well as an easing in the US dollar. While the much anticipated US Fed’s lift-off will almost certainly cause some disruption to global markets, it is not expected to cause any major crises. Click here for full article.


Offshore investors less negative on Australia

A recent market update from NAB, after a US marketing trip, has shown a more positive outlook on the Australian economy from North American investors than expected, on the back of better than expected job growth. Canadian investors saw considerable parallels between Australian economic developments and those in Canada due to lower commodity prices in each case, but were more bearish on the outlook for the Canadian economy and currency in each case.  Investors were generally of the view that China would continue to allow its currency to moderately devalue, with very few looking for a large move. Most agreed that the Chinese currency was relatively over-valued given its large rise in trade-weighted terms in recent years. Click here to read the full NAB update.


China’s State Power Investment Corp buys Pacific Hydro

China’s State Power Investment Corp has bought IFM Investors’ renewable energy business, Pacific Hydro, confirming an earlier report by Street Talk. After a hotly-contested auction which saw multiple bids for the business as a whole and for the separate Australian and South American units, the sale was made for a price said to be over $3bn. Pacific Hydro’s globally-significant portfolio develops, builds and operates renewable energy projects in Chile, Australia and Brazil. The company expects $175m earnings before interest and tax for the 2015 calendar year. Click here for full article.