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29 Jun 2015
China rate cut failing to shake shares - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained the cut in China's interest rates and reserve requirements failed to prevent a continued slide in Chinese shares.
Key Quotes:
"The Shanghai Composite lost 3.3% while the Shenzhen Composite was off 6%. The former is off almost 25% since the June 12 peak; it is still up 25% for the year. It is it hard to apply the conventional rule of thumb of a bear market being a 20% fall. Although we argue that the weekend rate cut was driven by several considerations, the precipitous fall in the equity market was surely a key factor.
Reports indicate that regulators are considering suspending initial public offerings to help stabilize the market. There are at least 28 IPOS (which could see as much as CNY4 trillion liquidity tied up) starting later this week. There is much precedent for such a measure.
"While Chinese shares finished off their lows, the same was not true in Japan. The Nikkei gapped lower and settled on its lows with a 2.9% drop. It probably did not help matters that industrial output slumped 2.2% in May. The Bloomberg consensus was for a 0.8% decline.On the other hand, retail sales rose 1.7% in May. The consensus was for a 1% increase."
Key Quotes:
"The Shanghai Composite lost 3.3% while the Shenzhen Composite was off 6%. The former is off almost 25% since the June 12 peak; it is still up 25% for the year. It is it hard to apply the conventional rule of thumb of a bear market being a 20% fall. Although we argue that the weekend rate cut was driven by several considerations, the precipitous fall in the equity market was surely a key factor.
Reports indicate that regulators are considering suspending initial public offerings to help stabilize the market. There are at least 28 IPOS (which could see as much as CNY4 trillion liquidity tied up) starting later this week. There is much precedent for such a measure.
"While Chinese shares finished off their lows, the same was not true in Japan. The Nikkei gapped lower and settled on its lows with a 2.9% drop. It probably did not help matters that industrial output slumped 2.2% in May. The Bloomberg consensus was for a 0.8% decline.On the other hand, retail sales rose 1.7% in May. The consensus was for a 1% increase."