The second time those circuit breakers were triggered, it was in response to China depreciating its currency 0.5% against the dollar.
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Meanwhile MSCI’s broadest index of Asia-Pacific shares outside Japan edged down 0.3pc after a brief stint in positive territory. Exporters bore the brunt of the selling, with Canon, Panasonic, Honda Motor and Sony falling 2-3 percent. Turnover totaled US$619 million during the trading session.
“Stand by and watch your life savings go down as the yuan is deliberately pushed lower and confidence in policy communications deteriorates, or get out one way or another including buying the Dollars and more homes in Vancouver and thus creating further imbalances elsewhere”, said Holt.
If the stock market woes are evidence that investors are losing faith in the Chinese economy, the foreign exchange reserve depletions are direr, because they signify the Chinese government’s diminishing ability to cope with its problems.
Keeping China’s notoriously volatile and speculative stock markets stable will be a trick.
As for the Chinese stock market itself, valuations are actually cheaper than the Australian stock market, he said.
“The patient was desperately looking for treatment but took the wrong medicine that only prolonged the illness”.
“There’s still quite a long list of things to worry about and this volatility is going to be with us for some time”. Chinese stocks closed 2.04 per cent higher. “The market drop is overdue”.
As the main driver of global economic growth over the past 15 years, a “hard landing” in China would be bad news for everyone.
He took advantage of the mild bounce on Tuesday to exit his position, saying he had “learned a lesson in blood”.
In commodities, crude oil prices struggled near 11-year lows and added to the risk-off mood, with the market giving more attention to the stronger dollar and swelling USA inventories rather than growing tensions between Saudi Arabia and Iran. It slipped to fresh four-and-a-half year lows on Monday, which some blamed for aggravating the stock market slump.
To calm currency markets, the PBOC set its daily midpoint rate for the yuan at 6.5636 per dollar prior to market open, firmer than Thursday’s fix at 6.5646 and closing quote of 6.5929. “They’ll probably try and do something to stablise the currency”, he said.
It also increases the likelihood of market-distorting arbitrage strategies, which the PBOC has shown signs of being concerned about. A wave of money-changing is taking place in many parts of the country, sometimes beyond the capacity of banks to handle, according to the Shanghai Securities News. Bloomberg News reported Tuesday that regulators had asked the nation’s exchanges to tell companies that the ban will remain in force.
This could entail the postponement of already delayed reforms, such as moving to a US-style IPO registration system that would reduce opportunities for corruption and regulatory meddling.
For many in China it was a financial – and probably emotional – rollercoaster.
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