China cuts loan rate as it battles coronavirus impact

BEIJING - China on Thursday announced it would cut interest rates in a bid to boost the economy, as it battles the economic fallout of the new coronavirus outbreak.

The reduction in the loan prime rate (LPR) -- one of the preferential rates commercial banks impose on their best customers and which serves as a reference for other lending rates -- is the latest measure to help companies struggling through the epidemic.

The one-year LPR was lowered to 4.05 percent from 4.15 percent, the People's Bank of China (PBoC) said in a statement.

The five-year LPR -- on which many lenders base their mortgage rates -- was also lowered to 4.75 percent from 4.8 percent. 

The LPR, released on the 20th day of every month, is based on rates of the central bank's open market operations, especially medium-term lending facility rates.

The rate reduction comes as Beijing battles to control a virus epidemic that has infected over 74,500 people in the country.

The outbreak is threatening to put a dent in the global economy, with China paralyzed by vast quarantine measures and major firms such as iPhone maker Apple and mining giant BHP warning it could damage bottom lines.

The central bank said earlier this month it would offer a 300-billion-yuan ($43-billion) boost to help businesses involved in fighting the epidemic.

Julian Evans-Pritchard of Capital Economics said the rate cut would "help companies weather the damage from the coronavirus at the margins".

But he said the ability of firms to postpone loan repayments and access loans on preferential terms would be more important in the short-term.

"We expect the People's Bank to continue loosening monetary conditions in the coming weeks, especially given signs that the coronavirus disruptions have started to weigh on employment," he said.

"But rate cuts alone will provide limited relief to the millions of small private firms that are suffering the most from the epidemic and are poorly served by the formal banking (sector)."

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China to destroy banknotes from coronavirus-hit sectors

The Guangzhou branch of China’s central bank said it would destroy all banknotes collected by hospitals, wet markets and buses to ensure the safety of cash transactions as the country battles a coronavirus epidemic.

Financial news outlet Caixin reported on Saturday that officials at the People’s Bank of China’s (PBOC) branch in the southern city ordered that all paper currency from sectors with high exposure to the coronavirus be withdrawn for destruction.

Commercial banks in the province should put banknotes from these sectors aside, disinfect them and hand them in to the PBOC.

The order comes after Fan Yifei, deputy governor of the central bank, said on Saturday that 600 billion yuan ($85.6 billion) of new banknotes had been distributed throughout the country since Jan. 17, including 4 billion yuan in fresh notes sent to Wuhan at the center of the outbreak before the Lunar New Year.

The central bank said that in general it would use high temperatures or ultraviolet light to disinfect cash, and store the currency for more than 14 days before putting it back in circulation.

Nearly 3 billion yuan in new banknotes was injected into the southern province of Guangdong, excluding Shenzhen, between Feb. 3 and 13, while 7.8 billion yuan was withdrawn from circulation, the PBOC said.

The banking industry extended 270 million yuan in cash through 1,249 transactions to government agencies, epidemic prevention and control related enterprises and other frontline units, Caixin reported. Cash withdrawals amounted to 800 million yuan through 6,186 transactions.


Central banks routinely collect and destroy old coins and banknotes in exchange for new ones. This does not affect the money supply, and is done to maintain a healthy amount of usable currency.

Caixin cited an unnamed deputy chief at a large joint stock bank in Guangzhou as saying that customers would be required to confirm the origin of the banknotes being deposited at their branches but in reality, “it would be difficult for such a measure to be completely effective”.

Fan also said that China had pledged extra funds to banks, prodding them to help manufacturers and businesses pull through headwinds from the China-US trade war and the nation’s worst health crisis in nearly two decades.

Economic growth, which already slowed to 6 percent in the fourth quarter, is likely to sputter further in the three months ending in March, with an estimated 50 million workers forced to stay home since late January, disrupting production of everything from clothing to toys and crucial components.

The State Administration of Foreign Exchange said it had help fast-track 1,370 foreign exchange transactions in China between January 27 and February 12, including 70 for imports into Hubei, mainly for the purchase of masks, protective gear and production materials.

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Chinese central bank to pump $173-B into economy to fight virus

China's central bank said Sunday it would pump 1.2 trillion yuan ($173 billion) into the economy as it ramps up support for a nationwide fight against a deadly virus that is expected to hit growth.

The People's Bank of China (PBOC) said in a statement it would launch a 1.2 trillion yuan reverse repurchase operation on Monday to maintain "reasonable and abundant liquidity" in the banking system, as well as a stable currency market, during the epidemic.

It added that the overall liquidity of the banking system would be 900 billion yuan ($129 billion) more than in the same period last year.

The move will kick in the day that China's financial markets reopen, following an extended Spring Festival break.

The virus has now infected over 14,000 people in China and claimed over 300 lives.

On Saturday, the PBOC also announced a range of measures to step up monetary and credit support to enterprises which are helping in its fight against the virus epidemic, such as medical companies.

China's central bank urged financial institutions to provide "sufficient credit resources" to hospitals and other medical organisations, among other measures.

The move to inject liquidity into its financial system comes as the virus threatens to take a toll on an already slowing economy.

China saw economic growth of 6.1 percent last year, the slowest in around three decades. Analysts are warning this could weaken further if the spread of the SARS-like virus goes on for an extended period.

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China cuts new benchmark rate to boost economy

BEIJING - China on Wednesday cut interest rates in a bid to shore up the world's number two economy as cooling domestic demand and a bruising trade spat with the United States hit growth.

The reduction in the loan prime rate (LPR) -- one of the preferential rates commercial banks impose on their best customers and which serves as a reference for other lending rates -- was widely expected after disappointing economic data in October.

The one-year LPR was lowered to 4.15 percent from 4.20 percent in October, the People's Bank of China (PBoC) said in a statement.

The five-year LPR -- on which many lenders base their mortgage rates -- was also lowered to 4.8 percent from 4.85 percent. 

The PBoC announced in August a plan to better reflect market changes with a new benchmark lending rate. The LPR, released on the 20th day of every month, is based on rates of the central bank's open market operations, especially medium-term lending facility rates.

The LPR cut is the latest in a series of measures used to reduce borrowing costs as China attempts to free up funds for credit-starved parts of the economy. 

Beijing is struggling to kickstart the economy, which expanded at its lowest pace for nearly three decades in the third quarter, battered by the US trade war, falling global demand for its goods and government battles against debt.

The PBoC on Monday trimmed the seven-day reverse repurchase rate to 2.50 percent from 2.55 percent, encouraging commercial banks to lend more to small and medium-sized companies.

However, cutting the LPR will have a "small" impact on the economy since it will "not lower the interest rate on the bulk of outstanding loans that are still linked to the PBoC's traditional lending rate", said Julian Evans-Pritchard at Capital Economics.

The decline in the five-year LPR "hints at a possible softening" of restrictions on property buying put in place to mitigate price bubbles, he wrote in a research note. 

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China promotes use of yuan among Southeast Asian nations

SHANGHAI—China published a five-year blueprint on Friday seeking economic and financial integration between southern Guangxi province and Southeast Asia, representing Beijing’s latest effort to promote international use of the yuan currency.

China’s state council, or cabinet, has agreed to build Guangxi, which borders Vietnam, into a financial gateway between the Association of Southeast Asian Nations (ASEAN) and China, the world’s second biggest economy, the People’s Bank of China (PBOC) said in a statement on its website.

As a key objective of the plan, China will promote the use of the yuan among ASEAN countries, with plans to facilitate cross-border trade settlement, currency transactions, investment and financing in the Chinese currency.

More specifically, China will encourage the use of yuan in its commodities trade with ASEAN, support yuan-denominated lending to projects in the region, seek to build offshore yuan markets and promote cross-border financial investments.

The plan, which spans five years until the end of 2023, was jointly published by 13 Chinese government agencies including the central bank, the foreign exchange regulator, the securities watchdog and the ministry of finance.

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Different approaches to bitcoin in Asia

TOKYO - From clampdowns to a warm embrace, regulators in Asia have taken very different approaches to dealing with the bitcoin phenomenon. Here are the developments in a few key markets:

CHINESE CLAMPDOWN 

In mid-September, China's central bank, the People's Bank of China (PBOC), told virtual currency trading platforms based in Beijing and Shanghai to cease market operations.

Authorities also clamped down on ethereum and any other electronic units that are exchanged online without being regulated by any country.

The PBOC said it wanted to fight "speculation" around the crypto-currencies, which "seriously disrupted the financial system".

This came after the National Internet Finance Association of China -- an offshoot of the PBOC -- drew up a damning report on virtual currencies, saying they were "increasingly used as a tool in criminal activities" such as drug trafficking.

Experts say Chinese authorities are also concerned about possible capital flight which could harm the value of the yuan.

However, the authorities in Beijing have not yet attacked bitcoin mining -- the creation of the digital currency.

Between 60 and 70 percent of new bitcoins are created in China.

KOREAN CONCERN 

Hyper-wired South Korea was also a hotbed for virtual currencies such as bitcoin, accounting for some 20 percent of global transactions, about 10 times its share of the world economy.

But South Korean authorities late last year banned financial institutions from dealing in virtual currencies on fears of a bubble fuelled by retail speculators.

About one million South Koreans, many of them small-time investors, are estimated to own bitcoins and demand is so high that prices are around 20 percent higher than in the US.

Initial coin offerings (ICOs) -- where companies sell newly mined cryptocurrencies to investors for real money -- were also outlawed.

The government has also pledged to strengthen investor protection rules, in an effort to curb speculation and potential fraud.

Announcing the ban on ICOs in September, South Korea's Financial Services Commission declared "cryptocurrencies are neither money nor currency nor financial products".

Youbit, a South Korean exchange trading bitcoin and other virtual currencies, declared itself bankrupt in December after being hacked for the second time this year.

North Korea was accused of being behind the first attack.

SINGAPORE CAUTION 

Singapore's central bank has issued a warning over cryptocurrencies, cautioning the public about the risk of jumping in on the "bitcoin bubble".

The Monetary Authority of Singapore noted they are not backed by any central bank and are unregulated, which means those who lose their investments have no grounds for redress under Singapore law.

Yusho Liu, co-founder of Singapore-based cryptocurrency wallet Coinhako, says demand has been soaring, with transactions up around 10-fold over the past year.

However, while regulators have been prepared to offer a cautious free rein to the digital units, "financial institutions and service providers have been rather resistant", Liu told AFP.

"In fact, I believe that only 30-40 percent of the market potential is fulfilled because of the friction generated by such matters. This is the key missing piece of Singapore being the fintech hub," said Liu.

JAPANESE JUMP-IN 

The high-profile collapse of digital currency exchange platform MtGox failed to douse the enthusiasm for virtual currencies in Japan, which in April became the first country in the world to proclaim it as legal tender.

As many as 10,000 businesses in Japan are thought to accept bitcoin and bitFlyer, the country's main bitcoin exchange, saw its user base pass the one-million mark in November.

Many Japanese, especially younger investors, have been seduced by the idea of strong profits in the context of ultra-low interest rates that offer little in the way of returns.

However, the governor of the Bank of Japan, Haruhiko Kuroda, has recently issued a warning that the recent rise of the bitcoin price was "abnormal".

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China opens bond market to foreign investors

China will allow foreign investors direct access to its massive bond market from Monday, the Chinese central bank said.

A platform allowing one-way "northbound" investments from Hong Kong into the Chinese bond market will go into "experimental operation" on July 3, the People's Bank of China and the Hong Kong Monetary Authority said in a joint statement Sunday, which came as Hong Kong marked the 20th anniversary of its handover to China by Britain.

Access to the market will be restricted to "qualified investors" including central banks and sovereign wealth funds, but also commercial banks, insurers, brokerage firms and investment funds, according to the PBOC.

China's debt market is the third largest in the world, with a cumulative value of about $10 trillion according to Bloomberg news agency.

However, this booming market has been virtually out of reach for foreign investors, who currently hold only a small portion of the bonds issued in China -- less than 1.5 percent according to Bloomberg estimates.

China has moved gradually toward opening its capital markets.

In 2014, a trading link between the Hong Kong and Shanghai stock exchanges was introduced, and another was started in December 2016 between Hong Kong and Shenzhen, China's other exchange.

The links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.

The bond move is the latest in a series of liberalization pledges from China, which has regularly been hit by complaints from foreign companies and trading partners about access to its markets.

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China seen to post solid 1Q growth as debt risks loom

BEIJING - China is expected to report on Monday that its economy grew 6.8 percent in the first quarter, well above Beijing's full-year target, buoyed by surging government infrastructure spending and a gravity-defying property market that is showing signs of overheating.

A strong reading could help wobbly global financial markets but add to worries that China's government is still relying too heavily on old growth engines like stimulus and not doing enough to tackle risks from an explosive build-up in debt.

Though policymakers have pledged repeatedly to push reforms to head off financial risks and asset bubbles, the government is seeking to keep the world's second-largest economy on an even keel ahead of a major leadership transition later this year.

Beijing has set a slightly more modest growth target of around 6.5 percent for this year, theoretically offering more wiggle room for reforms after the economy grew 6.7 percent in 2016 - the weakest pace in 26 years.

Most economists polled by Reuters expect the economy expanded 6.8 percent in the first quarter from a year earlier, the same pace as in the fourth quarter of 2016. On a quarter-on-quarter basis, it likely grew 1.6 percent in January-March from the previous three-month period.

Economists at ANZ reckon growth may even clock in at 6.9 percent in the quarter, pointing to strong property and infrastructure investment.

"The announcement in early April of the construction of the Xiongan new economic zone, which requires massive infrastructure spending, suggests Chinese authorities are likely to rely more on investment to stabilize growth in the next few years," ANZ said in a note.

China's long-ailing industrial sector has been posting its best profits in years, thanks to higher prices for steel and other building materials, giving "smokestack" industries more cash flow to pay off debt and invest in more efficient plants.

China's export outlook also brightened considerably on Thursday as it reported forecast-beating trade growth and as US President Donald Trump softened his anti-China rhetoric in an abrupt policy shift, though the risk of US protectionist trade action is by no means off the table.

Still, many analysts expect economic growth to cool later this year as the impact of earlier stimulus measures starts to fade and as local authorities resort to ever-tougher measures in a bid to get soaring home prices under control.

ACCUMULATED PROPERTY CURBS

Most analysts don't see a price crash, but believe the accumulated weight of property curbs will eventually translate into weaker sales, construction and investment.

China imported the most iron ore on record in the first quarter, but iron ore and steel futures prices are nosediving on fears that its steel production is outweighing demand.

Beijing also is continuing to rely heavily on new credit to generate growth as productivity slows, despite worries about debt risks.

China's banks extended the third highest loans on record in the first quarter, though March lending was less than expected.

At the same time, China's central bank has shifted to a tightening bias, and is using more targeted measures to contain risks in the financial system, after years of ultra-loose settings.

MORE RATE INCREASES?

The People's Bank of China (PBOC) has raised short-term interest rates several times already this year, while boosting its regulatory oversight.

Analysts predict further modest rate increases this year, but do not expect a full-blown policy rate hike as authorities fear tapping the brakes too hard would stunt economic growth.

The Organisation for Economic Co-operation and Development (OECD) says China's total private and public debt has exceeded 250 percent of GDP, up from 150 percent before the global financial crisis.

"While the authorities obviously recognize the risks, credit has continued to expand at a pace that looks unsustainable," analysts at Barclays said.

"Although this does not necessarily equate to the risk of an imminent crisis, the apparent plan to 'kick the can down the road', at least past the Party Congress, means that problems left to fester may become more difficult to resolve."

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China's central bank increases its power in battle to curb risks

BEIJING - China's central bank has been quietly boosting its policy independence and regulatory reach as it seeks to contain risks to the financial system, policy insiders said, to help ensure stability ahead of a five-yearly leadership team transition this year.

By greater use of market mechanisms to adjust interest rates instead of changing the official benchmark rates, which need political approval, the People's Bank of China has assumed more targeted, timely and effective control of its principal policy objective - to calibrate the cost of capital in the economy.

And by broadening the scope of the tools it uses to assess and limit the accumulation of risky assets in the banking system, it has expanded its oversight powers without getting embroiled in the kind of bureaucratic infighting that has beset plans to create a financial super-regulator.

That has given the PBOC room to manoeuvre at a time when it needs to contain speculative bubbles and risky lending while avoiding abrupt tightening measures that could hurt the economy.

"China faces big systemic risks, and 2017 is a crucial year for controlling such risks," said a policy adviser.

"The central bank has been expanding its regulatory functions and it's taking an over-riding role (on risk controls)."

The PBOC is likely to guide market interest rates higher using reverse repurchase agreements (repos), and its standing lending facility (SLF) and medium-term lending facility (MLF), while keeping benchmark interest rates steady, policy advisers said. That will allow it to fine-tune borrowing costs without using the blunt instrument of benchmark rates, which could hurt the heavily indebted corporate sector.

"China's economic fundamentals are slowly improving, but there could be problems if we tighten policy too quickly," a second policy adviser said.

The central bank raised short-term interest rates on March 16 in what economists said was a bid to stave off capital outflows and keep the yuan currency stable after the Federal Reserve had raised U.S. rates.

That followed increases in its repo rates and the SLF on Feb. 3, and a rise in rates on the MLF in late January.

Its recent changes to interest rates have been announced during market trading, including just hours after the Fed raised rates.

In contrast, previous changes in official benchmark lending and deposit rates, which needed cabinet approval, often came in the evening or at weekends.

China's central bank still has much less autonomy than Western peers, so it doesn't have the final word on adjusting official interest rates or the value of the yuan. The basic course of monetary and currency policy is set by the cabinet or by the Communist Party's ruling Politburo.

The PBOC did not return requests for comment.

TWIN PILLARS

Under long-serving Governor Zhou Xiaochuan, the PBOC has been a driver of the reform agenda, with a long-term goal to make banks' borrowing costs more market driven to improve resource allocation and wean the economy off its reliance on state-led investment.

Reuters reported in 2015 that China was considering bringing together its banking, insurance and securities regulators into a single super-commission, following a stock market crash that was blamed in part on poor inter-agency coordination.

But policymakers and the different bureaucracies have yet to reach a consensus on how to proceed with a regulatory overhaul.

"Such an overhaul is unlikely to happen soon because it concerns interests, personnel arrangements and relationships between different departments," said another policy adviser.

Chen Yulu, a central bank vice-governor, told a forum last month that the PBOC is trying to establish a "twin-pillar framework of monetary policy plus macro-prudential policy".

The central bank's macro-prudential assessment (MPA) is a formal evaluation that assigns a score to each bank based on parameters believed to include asset quality, capital adequacy, the proportion of liquid assets and stability of funding.

The MPA was launched last year and, while not publicly disclosed, the PBOC has widened the risk-assessment framework to include off-balance-sheet wealth management products (WMPs) in the first-quarter report, sources at commercial banks said, in line with the central bank's announcement in December.

"To control financial risks, we cannot have a fragmented regulatory system under which different agencies do their own things," said a source at a major commercial bank.

"Letting the central bank take the lead is most suitable, given that it's tasked to oversee money supply, liquidity, and control systemic risks."

WMPs, often linked to shadow banking, have seen explosive growth in recent years, with funds channelled into stock and bond markets.

"It's necessary for the PBOC to take on more regulatory functions under its MPA because there are many hidden risks that could pose a threat to China's financial stability," said the second policy adviser.

The official Shanghai Securities News reported last month that mortgages could also be included in the MPA this year. Home mortgages accounted for nearly 40 percent of China's record new loans of 12.65 trillion yuan ($1.8 trillion) last year.

The Organisation for Economic Co-operation and Development (OECD) says China's total private and public debt has grown to more than 250 percent of GDP, up from 150 percent before the global financial crisis. ($1 = 6.8979 Chinese yuan renminbi)

(Reporting by Kevin Yao; Editing by Will Waterman)

source: news.abs-cbn.com

Asia shares try to bounce, China looms large

SYDNEY - Asian shares bounced on Monday, though investors feared fireworks as Chinese markets reopen after the long Lunar holidays to find there had been a major reversal in the U.S. dollar and a worldwide rout in equities.

Rallies in European bank stocks and on Wall Street on Friday helped soothe jitters enough for MSCI's broadest index of Asia-Pacific shares outside Japan to rise 0.7 percent. That follows a loss of almost 4 percent last week.

E-Mini futures for the S&P 500 added 0.6 percent, while the cash market is closed for a holiday on Monday.

Japan's Nikkei broke a vicious losing streak by jumping 4 percent. The bounce retraced only some of last week's 11 percent drop, the largest such fall since 2008, and sentiment remained fragile.

"Although we consider the violent risk-off move of recent weeks largely unwarranted by economic fundamentals, the sheer magnitude of the sell-off has raised the risk that market volatility could feed back into the real economy," said Ajay Rajadhyaksha, an economist at Barclays.

"Central banks have very limited ability to ride to the rescue of risk assets."

Barclays pointed to three sources of volatility that had potential negative feedback loops: lower oil prices, capital outflows and macroeconomic weakness in China, and pressure on European banks.

"Of these, we consider China the biggest medium-term risk, but the least immediate issue," wrote Rajadhyaksha.

Indeed, analysts assumed the People's Bank of China (PBOC) would take the opportunity of the U.S. dollar's recent decline to fix its yuan at a firm level on Monday, hoping to deflect speculation about a possible devaluation.

In an interview over the weekend, PBoC Governor Zhou Xiaochuan said there was no basis for the yuan to keep falling, and China would keep it stable versus a basket of currencies while allowing greater volatility against the U.S. dollar.

Yet China also reports trade figures for January and any disappointment would be a setback to risk sentiment.

Median forecasts were for exports to dip 1.9 percent compared to a year earlier, with imports down 0.8 percent. The data tend to surprise, however, and estimates varied hugely from sharp falls to big rises.

Figures out over the weekend suggested there was still life in the Chinese consumer with retail sales growing 11.2 percent during the week-long Lunar New Year vacation compared with the same holiday period last year.

Retail figures from the United States out on Friday had also been relatively upbeat and helped calm market jitters a little.

The Dow ended Friday with a gain of 2 percent, while the S&P 500 added 1.95 percent and the Nasdaq 1.66 percent. The rally snapped a five-day losing streak, but all three indices were still down on the week.

Global oil prices had also surged as much as 12 percent on Friday after a report once again suggested OPEC might finally agree to cut production to reduce the world glut.

Early Monday, U.S. crude had eased 29 cents to $29.15 a barrel, while Brent crude dipped 42 cents to $32.94.

Oil was aided in part by weakness in the U.S. dollar as a steep drop in Treasury yields undermined the currency's interest rate differentials.

Against a basket of currencies, the dollar was up a shade at 96.171 having been at its lowest in almost four months. Likewise, it edged up to 113.64 yen, having touched a 15-month trough just under 111.00 last week.

The euro was last at $1.1217, having slipped from a 3-1/2 month peak of $1.1377.

Gold eased off to $1,231.60 an ounce, after enjoying its best week in four years.

source: www.abs-cbnnews.com

ANALYSIS: Impact of China's manufacturing contraction

MANILA - China manufacturing contracted for a sixth straight month to start 2016, with January producing the weakest reading for the Caixin Manufacturing Purchasing Manager's Index since August 2012.

Services, meanwhile, stayed in expansion mode, but eased from the 16-month high hit in December.

The National Bureau of Statistics of China just reported industrial profits contracted by between 2 and 4 percent, depending on the sector, with mining profits falling 58 percent year on year.

All of these point to weakness in the region's largest economy, which in turn points to more volatility in financial markets.

April Lee Tan, head of research at COL Financial, said this is part of an economic transition in China, a shift from relying on industrial output and exports, to a more "stable and defensive" growth driven by domestic consumer spending.

Tan said the shift is necessary if China wants to become more like the no. 1 economy, the US.

The view is shared by HSBC. In its Investment Strategy Report for 2016, HSBC said "China's slowdown contributed to damp global trade via a slowdown in manufacturing, but the country's services sector continues to improve in a dynamic that is typical of an economy moving towards 'developed status.'"

Therefore, the situation is promising because China's economy is behaving the way its policy makers wants it to. It is now just a matter of services, and consumer demand, growing strong enough to replace industry as the driver of China's economic engine. When that will happen is anyone's guess right now.

Obviously, China's transition will affect how the global economy works. Tan said commodities will be impacted greatly, with China being the largest consumer of industrial metals and oil.

Tan said once China truly transitions into a consumer-driven economy, miners will no longer enjoy "demand for precious metals, industrial metals" because the largest market in the region will be demanding consumer products instead.

Weakness in China, or weak demand for oil there, is already one of the themes behind multi-year lows in world oil prices, the other being the supply glut forced onto the market by the organization of petroleum exporting countries.

Industrial metals have also been falling since last year, and some of the clear losers in that respect have been Filipino nickel miners, including Nickel Asia, which has seen its stock price plunge.

Benjamin Pedley, regional head of investment strategy for HSBC Asia, said the foreign exchange market will likely remain volatile until there is some stability in China, as well as energy markets.

Pedley said, "If and when we get stability coming back from Chinese economic growth data, stability in energy markets, then that might be the situation where we see emerging market currencies stabilizing against the US dollar, but at this stage, we are not at that point."

However, Pedley said equities, specifically in China, the Philippines and Indonesia, only face limited downsides, because stocks there have already fallen so much, making share prices very attractive.

In China alone, shares in Shanghai and Shenzhen lost about $2 trillion in market value just last month. HSBC said this means so many quality companies are trading at affordable prices, and this is why it is overweight in China, the Philippines and Indonesia.

On top of that, Pedley is also confident the People's Bank of China (PBOC) will not sit by and watch the Chinese economic slowdown get out of hand.

Pedley rears to the "policy put" which simply means no matter how bad things get, policy makers can react to get the situation back under control. The PBOC has already intervened several times in January to limit volatility in China's stock and currency markets.

In Japan, the Bank of Japan just surprised the world with negative interest rates to further its efforts in boosting Asia's second largest economy. Pedley said whatever the situation, policy makers can and will intervene to smooth out the ripples.

That said, investors still need to tread carefully, because timing the end of all of this market volatility is still hard. HSBC's Herald van Der Linde said, "If I look at it at a 12-month basis, medium term, do I think money will flow back into Asia, yes I do think money will start to flow back. we will need to see a few things, better Chinese numbers, and maybe for example commodity prices need to stabilize."

So, at the very least, a turnaround should happen for markets like the Philippines within 2016.

source: www.abs-cbnnews.com