13 Jul 2015
Chinese stocks remain under pressure – Societe Generale
FXStreet (Edinburgh) - According to Strategist Kit Juckes at Societe Generale, volatility in the Chinese markets could be far from over.
Key Quotes
“China’s response to a correction in equity prices from over-bought levels was, at best, heavy-handed”.
“That the authorities felt the need to respond tells us something about the concern caused by an investment and asset price bubble, which is the biggest policy challenge the authorities face in the transition from export-led economy fuelled by cheap labour, to a consumer and services-led economy”.
“But a sharp fall in equity prices will have less impact on growth in the short run than would be the case in, say, the US. We wouldn’t rule out a return to calmer tines in Chinese equities – or even a strong rally – that could support Asian risk appetite”.
“But China’s still set for slower growth, and for a make-up of growth that is unfriendly for commodity prices and resource-exporting countries’ currencies”.
Key Quotes
“China’s response to a correction in equity prices from over-bought levels was, at best, heavy-handed”.
“That the authorities felt the need to respond tells us something about the concern caused by an investment and asset price bubble, which is the biggest policy challenge the authorities face in the transition from export-led economy fuelled by cheap labour, to a consumer and services-led economy”.
“But a sharp fall in equity prices will have less impact on growth in the short run than would be the case in, say, the US. We wouldn’t rule out a return to calmer tines in Chinese equities – or even a strong rally – that could support Asian risk appetite”.
“But China’s still set for slower growth, and for a make-up of growth that is unfriendly for commodity prices and resource-exporting countries’ currencies”.