As Global Stocks Rally, China Sends More Ominous Signal
Shanghai: As equities climb around the world, Chinese traders aren’t celebrating. The Shanghai Composite Index has fallen 3.9% this week, the worst performance among 93 global benchmark gauges tracked by Bloomberg and the steepest decline since January. It’s not just the stock market. The yuan is trading around its lowest level against a basket of currencies since November 2014, while yields on corporate debt have risen for 10 of the past 12 days.
Concern is mounting over rising credit defaults, while traders are also paring bets for more stimulus amid signs of stabilizing growth, according to Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai. A sudden 4.5%plunge by the benchmark equ- ity gauge on Wednesday revived memories of January’s stomachchurning turmoil, when shares sank 23% over the course of the month.
“People are still very skeptical, and with good reason,” said Hao Hong, China strategist at Bocom International Holdings in Hong Kong.
International concern about the health of China’s economy has been fading from view as data showed an improving picture and volatility in its stock and currency markets waned. Wednesday’s equity tumble in Shanghai caused barely a ripple among global shares as international traders focused on surging commodity prices -- spurred partly by expectations of higher Chinese demand. New CreditQuestions are being asked about how long the Communist Party can keep pumping money into the economy to prop up growth. New credit topped $1 trillion in the first quarter, helping gross domestic product to expand 6.7% -- still the slowest pace in seven years. Much of that money flowed into the property market, spurring concerns of a bubble.
“There’s still a lot of doubt over the sustainability of the turnaround in the Chinese macro numbers,” said Adrian Zuercher, head of Asia asset allocation in Hong Kong at UBS Group AG’s wealth management unit.