Financial Services Talking Points 26-02-16

financial talking points


Securities Regulator Removed as Chinese Financial Markets Recover
As China makes its way out of the 2015 trough it’s financial markets found themselves in, the chairman of the Chinese Securities Regulatory Commission, Xiao Gang has also moved on. The sharp market drop in late 2015 fostered state scrutiny of the CSRC and in particular, the department’s management of the crisis. Most felt responsibility lay in the hands of Xiao, who offered resignation in January according to Reuters and is said to be succeeded by Liu Shiyu. The removal of a ‘circuit breaker’ mechanism, also said to be responsible for market drops, marks another change in response to China’s 2015 crisis. Click here for full article.

Wednesday bounce back for Chinese shares
Yesterday, Chinese shares enjoyed a turbulent recovery from earlier losses resultative of small-cap stocks. In the Shanghai Index, gainers surpassed losers by 643 to 321, with 65 rising by the daily limit of 10 percent. Oil lead the broader index out of the negative opening, with a 0.67 percent increase for PetroChina, which closed at 7.53 yuan. Transportation, textiles, property and ship-building sub-indexes also followed suit, while small-cap stocks didn’t enjoy the rapid bounce back of their counterparts. Peak-to-trough fluctuations reached 2 percent overall during the day. Click here for full article.

Net capital exports see China surpass Germany
On Monday, German think tank Ifo Institute reported a Chinese overtake of net capital exports in 2015. This looks to prop China as the new global lead, with net capital exports of 293 billion U.S. dollars internationally, making it the first time since May 2010 that German capital exports will have been pipped from the top. Despite this, the report also noted that German capital exports themselves hit a new record of rising 8.3 percent in 2015 annual economic output, which was up from 7.3 percent in 2014. This leads to predictions of continued sustainable longterm growth in the German market, driven by good exports. Pair this with low oil prices and euro weakness, and the think tank predicted a smooth rise for Germany in 2016. Click here for full article.

Not all negative: maintaining confidence in the Chinese market
2015 brought currency devaluation, stock market corrections, data disappointments and an overarching decrease of Western confidence in Chinese economic strength. However, this shouldn’t be taken as a sing of worsening fundamentals, and instead should be seen as the backbone for greater Chinese market reform and an ease in financial policy. Time lags in policy impacts were unfortunate in 2015, the devaluation of the renminbi was seen as necessary. Furthermore, it seems the quiet confidences to remember for Western investors are an acceleration in market liberalisation and the slow but gradual maturation of the Chinese economy overall. All this leads to a necessary reminder for those looking in from the West that recent economic ‘turmoil’ should not represent what is to come from the Chinese market. Click here for full article.