MSCI to China A-shares to emerging market index

While market reaction to China A-shares' MSCI inclusion was somewhat muted, some analysts say it's a step in the right direction for Chinese stock markets. Some traders are worried, however, that this may be a new headwind for other emerging markets, including the Philippines. Cathy Yang has this report.

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Chinese stocks jump at open after MSCI decision

SHANGHAI - Shanghai rose at the beginning of trade Wednesday after US-based index compiler MSCI agreed to include mainland-listed shares in its benchmark of emerging markets.

The benchmark Shanghai Composite Index rose 0.29 percent, or 8.98 points, to 3,148.99, bucking a regional retreat.

The Hang Seng index in Hong Kong fell 0.35 percent, or 90.77 points, to 25,752.27.

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China stocks trading halted after rout

SHANGHAI - China accelerated the devaluation of the yuan on Thursday, sending currencies across the region reeling and domestic stock markets tumbling, as investors feared the Asian giant was kicking off a virtual trade war against its competitors.

Trading on China's stock markets were suspended for the rest of the day, for the second time this week, as a new circuit-breaking mechanism was tripped less than half an hour after the open.

The People's Bank of China again surprised markets by setting the official midpoint rate on the currency at 6.5646 yuan per dollar, the lowest since March 2011.

That was 0.5 percent weaker than the day before and the biggest daily drop since last August, when an abrupt near 2 percent devaluation of the currency also roiled markets.

The impact was immediate as regional currencies went into a tailspin. The Australian dollar, often used as a liquid proxy for the yuan, fell half a U.S. cent in a blink.

Shanghai stocks slid 7 percent to trigger the halt in trading, a repeat performance of Monday's sudden tumble. Japan's Nikkei shed 1.8 percent in sympathy.

A sustained depreciation in the yuan puts pressure on other Asian countries to devalue their currencies to stay competitive with China's massive export machine.

It also makes commodities denominated in U.S. dollars more expensive for Chinese buyers, which could hurt demand and thus further depress commodity prices in a vicious chain reaction.

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Great fall of China sinks world stocks, dollar tumbles

LONDON - Alarm bells rang across world markets on Monday as a 9 percent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors.

European stocks opened more than 3 percent in the red after their Asian counterparts slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand.

Safe-haven government bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.

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"It is a China driven macro panic," said Didier Duret, chief investment officer at ABN Amro. "Volatility will persist until we see better data there or strong policy action through forceful monetary easing."

With serious doubts now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies. It was last at 120.25 yen its lowest in three months.

The Australian dollar fell to six-year lows and many emerging market currencies also plunged, whilst the frantic dash to safety pushed the euro to a 6-1/2-month high.

"Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable," said Takako Masai, head of research at Shinsei Bank in Tokyo.

Commodity markets took a fresh battering. Brent and U.S. crude oil futures hit 6-1/2-year lows as concerns about a global supply glut added to worries over potentially weaker demand from China.

U.S. crude was down 3 percent at $39.20 a barrel while Brent lost 2.4 percent to $44.40 a barrel.

Copper, seen as a barometer of global industrial demand, tumbled 2.5 percent, with three-month copper on the London Metal Exchange hitting a six-year low of $4,920 a tonne. Nickel slid 4.6 percent to its lowest since 2009 at $9,730 a tonne.

GREAT FALL OF CHINA

The near 9 percent slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2009 and wiped out what was left of the 2015 gains, which in June has been more than 50 percent.

The latest rout was rooted in investor disappointment that Beijing did not announce expected policy support over the weekend after its markets shed 11 percent last week.

Compounding the real-time falls all index futures contracts slumped by their 10 percent daily limit, pointing to more bad days ahead.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 5.1 percent to a three-year low. Tokyo's Nikkei was down 4.1 percent and Australian and Indonesian shares hit two-year troughs.

"China could be forced to devalue the yuan even more, should its economy falter, and the equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy," said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.

There was further evidence that developed markets were becoming synchronized with the troubles. London's FTSE which has a large number of global miners and oil firms, was down for its 10th straight day, its worst run since 2003.

The pan-European FTSEurofirst 300, meanwhile, was down 3.1 percent by 0830 GMT (0430 EDT) at 1,382.15 points, wiping around 260 billion euros ($298.61 billion) off the index and taking its losses for the month to more that 1 trillion euros.

U.S. stock futures also pointed to larger losses for Wall Street's main markets, with the S&P 500 ESc1, Dow Jones Industrial and Nasdaq expected to open down 1.8, 2.2 and 3.1 percent respectively.

"We are in the midst of a full-blown growth scare," strategists at JP Morgan Cazenove said in a note.

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China stocks rebound sharply after Beijing slaps curbs on selling

BEIJING/SHANGHAI - Chinese stocks rebounded around 6 percent on Thursday, as Beijing's increasingly frantic attempts to arrest a sell-off that has roiled global financial markets finally appeared to gain some traction.

In the most drastic step yet to prop up the market, China's securities regulator banned shareholders with large stakes in listed firms from selling. The banking regulator said separately it would allow lenders to roll over loans backed by stocks.

By the close of trading, the CSI300 index of the largest listed companies in Shanghai and Shenzhen had raced up 6.4 percent, while the Shanghai Composite Index bounced 5.8 percent for its biggest daily percentage gain in six years.

China's malfunctioning stock markets remained semi-frozen, however, with the shares of around 1,500 listed companies - or around $2.8 trillion of stock - suspended, and some analysts said it was too early to call the endgame.

"The market sees some positive signs today," said Du Changchun, analyst at Northeast Securities in Shanghai. "But it is far from calling it a victory for the rescuers as more than half of listed companies are not trading."

More than 25 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the financial system is now a bigger risk than the crisis in Greece.

"We are inclined to believe that Beijing will escalate policy responses until they start working," said economists at Credit Suisse in a research note.

"If market conditions do not stabilize, we expect a statement of 'whatever it takes' from the Chinese government, given that social stability is at stake and financial systemic risks are evident."

The United States has voiced worries the stock market crash could get in the way of Beijing's economic reform agenda.

"NATIONAL TEAM"

The plunge in China's previously booming stock markets, which had more than doubled in the year to mid-June, is a major headache for President Xi Jinping and China's top leaders, who are already grappling with slowing growth.

Beijing, which had made handing a larger role to market forces a centerpiece of its economic reforms, has responded with a battery of support measures, including an interest rate cut, suspension of initial public offerings and enlisting brokerages to buy stocks, backed by cash from the central bank.

"The government will be able to stabilize the market because they have a lot of tools in the toolbox," said Christopher Moltke-Leth, head of institutional client trading at Saxo Capital Markets.

"But it is concerning that the Chinese government doesn't allow market forces to work, and that’s something China must change over time."

The Global Times, an influential tabloid published by the Communist Party's official newspaper, invoked the "national team" in an editorial rallying support behind the authorities' efforts to arrest the slide.

"While there are disaster victims everywhere in China’s stock market, the other scene is that the 'national team' is truly taking action," the paper said.

The China Securities Regulatory Commission (CSRC) said on its website late on Wednesday that holders of more than 5 percent of a company's stock would be barred from selling for the next six months.

The CSRC, which warned on Wednesday of "panic sentiment" gripping a market dominated by ordinary retail investors, said it would deal severely with any shareholders who violated the restriction.

The prohibition is unlikely to have much impact on foreign investors. No Qualified Foreign Institutional Investor (QFII), one of the main channels of foreign investment in China, holds more than 5 percent of a Shanghai or Shenzhen listed company. Foreign investors with more than a 5 percent stake in Chinese firms are all strategic investors.

"BIG FIST"

As the daily barrage of official measures to prop up the market continued, the banking and insurance regulators announced a series of moves to ease margin lending requirements and terms on stock-backed loans.

In the latest salvo against short sellers, who bet on falling prices, official news agency Xinhua said police were investigating suspected "malicious" selling of shares. The probe showed that the authorities would "punch back" with a "big fist" against illegal activities, Xinhua said on its microblog.

China's stock market is still smaller than those of many developed countries relative to GDP, and equity financing only accounts for a small portion of companies' capital funding.

"Even if the sell-off in Chinese mainland equities continues for a while, we doubt it will have a major adverse effect on China's economy," David Rees, economist at Capital Economics, wrote in a note.

Nevertheless, commodities that are sensitive to the outlook for the world's second-biggest economy have been hit, with copper prices touching a six-year low on Wednesday and iron ore tumbling to a 10-year low.

source: www.abs-cbnnews.com

Asia extends losses as China woes spread, yen shoots up

TOKYO - Asian equities extended losses on Thursday as concerns over China's market turmoil spread, while the safe-haven yen shot to a seven-week high as global risk appetite ebbed.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.2 percent, hovering near a 17-month low struck the previous day.

Japan's Nikkei dropped 1.8 percent, Australian shares lost 0.3 percent and South Korea's Kospi fell 0.9 percent.

The focus in Asia again turned towards how Chinese stocks would fare later in the session, with a series of increasingly aggressive attempts by authorities so far having failed to stem the massive exodus from a once booming market.

The country's stock markets have plunged nearly 30 percent over the last three weeks.

"Fundamentally, China is coming back to a point of attraction –the monstrous P/E ratios have come back to more realistic levels. However, the bursting bubble means value is unlikely to factor into thinking in the interim. The repercussions haven't completely played out yet," Evan Lucas, market strategist at IG in Melbourne, wrote.

China's securities regulator took the drastic step late on Wednesday of ordering shareholders with stakes of more than 5 percent from selling shares for the next six months in a bid to halt a plunge in stock prices.

U.S. shares slid sharply overnight on growing fears that nose-diving Chinese shares could destabilize the world's second- largest economy and have global implications.

The doom-and-gloom mood - already heightened earlier in the month by prospects of Greece leaving the euro - benefited the yen, often sought in times of economic uncertainty.

The dollar stood little changed at 120.815 yen, within reach of a seven-week low of 120.41 touched overnight when it suffered a bruising 1.5 percent fall.

The greenback was weighed down further as U.S. Treasury yields continued falling on flight-to-safety bids and new signs that the Federal Reserve may be hesitant about raising interest rates, as shown by their policy meeting minutes.

The dollar's tumble against the yen helped the euro, which climbed to $1.1075, pulling further away from a one-month trough of $1.0916 plumbed on Tuesday.

Commodities, far from immune to the slide in global equities, remained subdued. U.S. crude CLc1 nudged up 0.4 percent to $51.86 early on Thursday but has shed nearly nine percent so far this week.

Copper received a reprieve overnight thanks to the dollar's plunge, but the metal still remained within reach of a six-year low. Copper on the London Metal Exchange was down 0.4 percent at $5,495 a tonne after hitting the six-year trough of $5,240 a tonne on Wednesday.

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China stock market freezing up as sell-off gathers pace

SHANGHAI - China's tumbling stock market showed signs of seizing up on Wednesday, as companies scrambled to escape the rout by having their shares suspended and indexes plunged after the securities regulator warned of "panic sentiment" gripping investors.

Beijing, which has struggled for more than a week to bend the market to its will, unveiled yet another battery of measures to arrest the sell-off, and the People's Bank of China said it would step up support to brokerages enlisted to prop up shares.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index dropped 5.9 percent.

With nearly half the market on a trading halt and another round of margin calls forcing leveraged investors to dump whatever shares could find a buyer, blue chips that had been supported by stabilization funds earlier in the week bore the brunt.

"I've never seen this kind of slump before. I don't think anyone has. Liquidity is totally depleted," said Du Changchun, an analyst at Northeast Securities.

"Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips."

More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.

"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."

Commodities markets reflected growing concerns about the broader health of the world's second largest economy, with copper prices falling to a six-year low, Shanghai nickel futures sliding by their 5 percent daily limit, and oil falling toward $56 a barrel, near a three month-low.

TRADING HALTS

More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhen exchanges on Wednesday, taking total suspensions to about 1,300 - 45 percent of the market or roughly $2.4 trillion worth of stock - as companies scuttled to sit out the carnage.

With so many small-cap companies sheltering on the sidelines, the ChiNext growth board, which has seen some of the biggest swings in valuations, fell a modest 0.8 percent.

The plunge in China's previously booming stock markets, which had more than doubled in the year to mid-June, is a major headache for President Xi Jinping and China's top leaders, who are already grappling with slowing growth.

Beijing's interventionist response has also raised questions about its ability to enact the market liberalization steps that are a centerpiece of its economic reform agenda.

China has orchestrated brokerages and fund managers to promise to buy billions of dollars' worth of stocks, helped by a state-backed margin finance company which the central bank pledged on Wednesday to provide sufficient liquidity.

The securities regulator said the Securities Finance Corp had provided 260 billion yuan ($41.8 billion) to 21 brokerages, though that sum is only 40 percent of the amount of leveraged positions that investors have cut since June 18.

RETAIL INVESTORS

Unlike other major stock markets, which are dominated by professional money managers, retail investors account for around 85 percent of China trade, which exacerbates volatility.

"It's uncommon to see so many shares posting consecutive daily limit falls, and the index futures swinging so wildly," said Wang Feng, CEO and founder of hedge fund firm Alpha Squared Capital Co and a former Wall Street trader.

"It's a stampede. And the problem of the market is that all the players move in the same direction, and are too emotional."

A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other "stability measures" have done little to calm investors.

The barrage of official commentary and new support measures continued throughout Wednesday's trading session, without visible effect.

Deng Ge, a spokesman for the China Securities Regulatory Commission, said in remarks posted on its official channel on Weibo, China's version of Twitter, that there had been a big increase in "irrational selling" of stocks.

Government agencies also announced that insurers would be allowed to by more blue chips and urged major shareholders and top executives to buy their own shares.

But the market sell-off has extended beyond the mainland, with Chinese stocks on U.S. exchanges falling as much as 6.1 percent on Tuesday, according to the Bank of New York Mellon index of such securities.

Hong Kong's Hang Seng Index fell 5.8 percent, with shares of Chinese brokerages taking a heavy beating.

"Investors are extremely unimpressed with their sudden conscription into national service, and you can see that in their share prices," said Matthew Smith, a strategist who covers the China financials sector for Macquarie.

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China stocks nosedive as regulator warns of 'panic'

SHANGHAI - Chinese stocks dived on Wednesday, as the country's securities regulator warned investors were in the grip of "panic sentiment" and the market showed signs of freezing up as companies scrambled to escape the rout by having their shares suspended.

Beijing, which has struggled for more than a week to bend the market to its will, unveiled yet another battery of measures to arrest the sell-off, and the People's Bank of China said it would step up support to brokerages enlisted to prop up shares.

"I've never seen this kind of slump before. I don't think anyone has. Liquidity is totally depleted," said Du Changchun, an analyst at Northeast Securities.

"Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips."

The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 4.8 percent in morning trade, while the Shanghai Composite Index dropped 3.9 percent. Both indexes had plunged around 8 percent at the market open.

Around 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the real economy is now looming as a bigger risk than the euro zone crisis.

"Also, the ripple effect from the market correction has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."

More than 500 China-listed firms announced trading halts on the Shanghai and Shenzhen exchanges on Wednesday, taking total suspensions to about 1,300 - 45 percent of the market - as companies scuttled to sit out the carnage.

With so many small-cap companies sheltering on the sidelines, the ChiNext growth board, which has seen some of the biggest swings in valuations, fell a relatively modest 1.5 percent.

SOURING BOOM

The plunge in China's previously booming stock markets, which had more than doubled in the year to mid-June, is a major headache for President Xi Jinping and China's top leaders, who are already grappling with slowing growth in the world's second largest economy.

Beijing's interventionist response has also raised questions about its ability to enact the market liberalization steps that are a centerpiece of its economic reform agenda.

China has orchestrated brokerages and fund managers to promise to buy billions of dollars' worth of stocks, helped by a state-backed margin finance company which the central bank pledged on Wednesday to provide sufficient liquidity.

The securities regulator said the Securities Finance Corp had provided 260 billion yuan ($41.8 billion) to 21 brokerages.

Unlike other major stock markets, which are dominated by professional money managers, retail investors account for around 85 percent of China trade, which exacerbates volatility.

"It's uncommon to see so many shares posting consecutive daily limit falls, and the index futures swinging so wildly," said Wang Feng, CEO and founder of hedge fund firm Alpha Squared Capital Co and a former Wall Street trader.

"It's a stampede. And the problem of the market is that all the players move in the same direction, and are too emotional."

A surprise interest-rate cut by the central bank at the end of June, relaxations in margin trading and other "stability measures" have done little to calm investors.

The barrage of official commentary and new support measures continued on Wednesday.

Deng Ge, a spokesman for the China Securities Regulatory Commission, said in remarks posted on its official channel on Weibo, China's version of Twitter, that there had been a big increase in "irrational selling" of stocks.

The state asset administrator told central-government-owned firms they should not sell shares in their own listed companies and should buy more stock in companies they controlled to stabilize prices.

And China's insurance regulator said "qualified" insurers could increase their ratio of equity assets to 40 pct from 30 pct by buying blue-chip stocks.

But the market sell-off has extended beyond the mainland, with Chinese stocks on U.S. exchanges falling as much as 6.1 percent on Tuesday, according to the Bank of New York Mellon index of such securities.

Hong Kong's Hang Seng Index fell 4.2 percent, with shares of Chinese brokerages taking a pounding.

The impact was also felt in credit markets, where the spread on bonds from securities houses widened by 18-20 basis points.

"Chinese securities companies themselves have a lot of financial asset holdings, and when there is a sell-off there will be a big impact on their balance sheets," said Hong Kong-based Kingston Lam, credit analyst with Credit Agricole. "If they are using up cash to buyback shares it will be a further negative."

source: www.abs-cbnnews.com

Chinese markets welcome central bank easing but hunger for more

SHANGHAI - Chinese stocks shot up more than 2 percent on Thursday before paring gains and money rates eased after the central bank injected more money into the system to spur bank lending and support the world's second-biggest economy.

The yuan also dipped after the People's Bank of China (PBOC) cut banks' reserve requirement ratios by 50 basis points, a widely expected stimulus move that has helped fuel a stock market rally of nearly 40 percent in the last few months.

"The cut was largely priced in to the stock market (already), but it has reconfirmed an important message to investors that China's monetary cycle has firmly shifted to the loosening camp," Jing Ning, Portfolio Manager at Fidelity Worldwide Investment, wrote in a note to clients.

"The next question is whether this is followed by a rate cut by the PBOC. We will not see the impact of last November's rate decision on the economy until the end of this quarter."

Weighed down by a cooling property market, industrial overcapacity and slowing investment, China's economy grew at its slowest pace in 24 years in 2014 and is expected to cool further to around 7 percent this year, even with additional stimulus.

China's factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January and firms see more gloom ahead, an official survey showed on Sunday, raising expectations that policymakers will have to take more action to forestall a sharper slowdown.

But Chinese investors, like their counterparts in many other parts of the world around the world, are seeing the glass as half-full and betting that a flood of cash from central banks will continue to boost share prices even as the weaker economy threatens companies' profit margins.

In Shanghai, the CSI300 index was up around 1 percent by early afternoon after surging 2.5 percent at the open, while the Shanghai Composite Index .SSEC was up 0.7 percent after opening up 2.4 percent.

The yuan opened at 6.2560 per dollar and was at 6.2536 at midday, 59 pips away from the previous close.

As the economy cools, money has been flowing out of China, putting downward pressure on the currency and prompting large state-owned banks to step in to sell dollars to ensure the yuan's weakness doesn't trigger even larger outflows.

Analysts at ANZ believe the RRR cut will inject about 600 billion yuan ($95.96 billion) into the banking system, though questions remain over whether the money will fund real economic activity or be channeled into speculation like bigger bets on the stock market.

"We maintain our view that the authorities will not depreciate the currency, as that would risk even more capital outflows, which could prove to be destabilising," ANZ strategists wrote in a daily note.

Money market rates edged down slightly, with the weighted average of the benchmark seven-day bond repurchase agreement CN7DRP=CFXS was 4.4 percent in late morning, down a moderate 14 basis points from Wednesday.

Economists generally expect the central bank to cut reserve ratios one or two more times this year and lower interest rates again, in addition to pumping more funds into the system as it struggles to bring down persistently high funding costs which are putting further strains on debt-laden Chinese companies.

source: www.abs-cbnnews.com