While investors should focus on China’s economy, not its turbulent equity market, the economy isn’t looking that great either.
Advertisement
The DAX, Germany’s benchmark stock index, is off 7% for the year already and France’s CAC 40 is down 5%.
John Woods, Chief Investment Officer, Asia-Pacific, at Credit Suisse’s private bank told Reuters that the turmoil seen this week was likely to be a “short, sharp shock” similar to last summer’s China stocks crash, which ironically first convinced the stocks regulator of the need for a circuit breaker.
Japan’s Nikkei 225 index lost 0.4% to close at 17,697.96 while Hong Kong’s Hang Seng index gained 1% to 20,541.96 on Friday. Anadarko Petroleum gave up $2.13, or 4.9 percent, to $41.64 and Ensco lost 74 cents, or 5.5 percent, to $12.76.
If the index fell seven per cent, markets were suspended for the rest of the day.
Before trading began, the People’s Bank of China (PBOC) set its yuan mid-point at 6.5636 against the dollar, indicating the Chinese currency would trade slightly stronger, after Thursday’s fixing guided the yuan lower at its fastest pace since August’s devaluation.
Authorities lowered the yuan’s central rate against the greenback by 0.5% to 6.5646 (nearly Rs 65.30), the weakest since March 2011 on Thursday. The spot market opened at 6.57 per dollar, and was trading at 6.5887 at 0313 GMT.
After its sharply lower fix on Thursday, the PBOC intervened heavily to defend the yuan in offshore trade, reversing a decline of more than 1 percent that took it to a record low. The gains narrowed losses for the week to 7.7%.
Under the circuit breaker system, markets were suspended for 15 minutes if the CSI 300 index of Shanghai and Shenzen stocks fell by five per cent.
Market attention now turns to the United States unemployment figures, which are due out later on Friday.
A lower unit should make Chinese exports more competitive on world markets, but at the cost of its imports becoming more expensive in yuan terms. The economy grew at a two per cent annual rate in the third quarter.
Late on Thursday, China’s securities regulator announced a suspension in circuit breakers after just four days operating the mechanism, saying it had not worked as anticipated in actual situations and was doing more bad than good.
Brent LCOc1 gained 2.2 percent to $34.49 after touching $32.16 on Thursday, the lowest since April 2004. The gains shrank losses for the week for both to less than 10%. Korea’s Kospi added 13.29 points, 0.7 percent, to 1,917.62.
Investors also seemed to be moving to safer havens, with shares in gold miners Newcrest, Regis Resources and Evolution trading higher.
Advertisement
The 10-year USA treasuries yield fell to a two-and-a-half-month low of 2.119% on Thursday and last stood at 2.1773%.
