As Global Stocks Rally, China Sends More Omi­nous Sig­nal

The Economic Times - - Markets: Beating Volatility -

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.

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