Javier Santacruz Cano – 5:00 – 11/07/2015
One of the few items that have overshadowed the Greek problem is the sharp drop in the main stock indices Mainland China and Hong Kong. This movement has occurred quickly and unexpectedly, which has been around the world and put the spotlight on the potential structural problems of the second world economy.
This phenomenon is part of a classical observable fact in financial markets: the overreaction of stockbrokers. As noted Professor Dornbusch in the sixties, a shock-a transitory macro data better or worse than expected, for example causes a reaction of the average market breaking levels that traded and then later return to that environment .
Despite the effort in recent days to find complex to explain what happened in China, the reality is much simpler than it seems. The market is in full corrective phase after a year of very strong cumulative increases. In terms of the various indices, the Hang Seng of Hong Kong accumulated a rise of 26.4 percent year until late April, setting record high. More dramatic was the rise in the main index of the Shanghai Stock Exchange, which until early June highs increased in value by 150 percent year on year.
In all this time from highs, the Hang Seng has lost 11.5 percent while the Shanghai Composite has done so by 25 percent, correcting a small part of the rise recorded in the last year. In this regard, one wonders why the Chinese stock market has risen so much and so fast in all this time? What is the catalyst decreases in the last days?
Both the Stock Mainland as Hong Kong are receiving huge amounts of investment not only from China but also from outside. A good indicator of this is both the number of IPOs of companies (192 OPS in Shanghai and Shenzhen from January to June) as the “waiting list” of companies who want to get financed by selling shares.
So far, the new listed have captured around 4 trillion yuan (more than half a billion euros) with a double engine: first, the extent of stock market investment to small and medium savers and, on the other hand, the momentum of the Beijing government to all companies, regardless of size, put on the market for further international expansion.
Given the avalanche of demand for shares and derivatives, Chinese parks have overheated, reaching record highs. At this point, one of the key elements is the role of brokers and brokerage houses derivatives. Therefore, given the apparent concentration of risks in the operational and coverage, the Chinese government has stepped through a strategy of “soft-landing”: the creation by 21 brokers of a liquidity fund to cover possible loan losses, endowed with 120.000 billion yuan.
Under these facts, the market needs a tune whose speed depends on the stimuli that can introduce such major players as the Chinese Central Bank or regulators. For several days, the “road map” is clear and is drawn into two parts: the first is the “stick” or strong collapse in the value of listed; while the second is the “carrot” through measures such as liquidity or the suspension of IPOs.
Nothing has happened, in short, is no coincidence. When the price of a company is separated from its foundations, later or earlier terminated by correcting its path. Indeed, the blue chips such as China Railway, Tencent or ICBC, have corrected many of the increases in the past year as its foundations go beyond the process of adjustment and structural change in the Chinese economy. The Chinese “sneeze” will serve to market a new, more moderate to the internationalization of the yuan and the international expansion of Chinese companies boost.
Other news
Also on the web
No comments:
Post a Comment