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WORLD NEWSFriday 8 January 2016
Chinese market aftershocks may last for months
JOE McDONALD
AP Business Writer
BEIJING (AP) - The latest
trigger was currency jitters, the Shanghai index is up
but Thursday’s plunge in
Chinese stocks was just one
in a series of aftershocks
from last year’s boom and
bust that could shake mar-
kets for months to come.
Investor anxiety over eco-
nomic weakness and a
possible glut of unwanted
shares flooding the market
have complicated Beijing’s
A security guard looks out near a display showing the security features of the new 100 Yuan note
in Beijing, China, Thursday, Jan. 7, 2016. This week’s plunge in Chinese stocks was fueled by con-
cern Beijing is letting China’s currency, the yuan, weaken too fast against the U.S. dollar.
efforts to withdraw emer-
gency controls imposed
after Chinese stock prices
collapsed in June.
On Thursday, trading halt-
ed for the day after a stock
index fell 7 percent a half-
hour into the trading day.
It was this week’s second
daylong suspension after
a plunge in prices Monday
tripped the same “circuit
breakers” that were intro-
duced Jan. 1.
The benchmark Shanghai
Composite Index more
than doubled between
late 2014 and June, then
dived 30 percent. Support-
ed by a multibillion-dollar
government intervention,
the market rose almost 25
percent in the final months
of 2015, only to collapse in
the new year. That left the
main index down 15 per-
cent from its December
peak.
Wild price swings could
continue through the first
half of this year, according
to financial analysts. Even
after the latest declines,
36 percent from October
2014.
The turmoil in China trig-
gered a sell-off in Asian
and Western stocks. Beijing
keeps its markets sealed off
from global capital flows,
but due to the vast size
of China’s economy, for-
eign investors watch them
closely and react to volatil-
ity.
“The market still is trying to to an outflow of capital,
find a bottom, and that
takes time,” said Chen
Yong, a strategist at Lianx-
un Securities. “The key is to
be able to resume normal
daily trading, and during
that time volatility is inevi- was the lowest since March
table.”
Economic growth fell to
a six-year low of 6.9 per-
cent in the July-September
quarter and is forecast by
the International Monetary
Fund to decline further to
6.3 percent this year. Mon-
day’s stock price plunged
was triggered by surveys
that showed manufac-
turing in December was
weaker than expected.
The latest bout of selling
was fueled by concern Bei-
jing is letting China’s yuan
weaken too fast against
the dollar.
The yuan, also known as
the renminbi, has drifted
down by 6 percent against
Eurozone set for better economic
the U.S. currency since the growth in 2016 - China permitting
central bank adopted a
mechanism in August it PAN PYLAS
said would make the state- Associated Press
set exchange rate more LONDON (AP) — It’s not ideal timing. Just as the euro-
market-oriented. zone economy finally appears to be picking up speed,
The yuan’s link to the dol- its future is clouded by concerns over China and the
lar meant it soared as the world economy.
U.S. currency climbed over The gyrations in Chinese financial markets this week
the past year, making it have been stoked by worries over the scale of the
overvalued by 10 to 15 per- slowdown in the world’s number 2 economy, leading
cent against those of other investors to scale back expectations for global growth
developing countries. But this year.
the prospect Beijing would China’s turmoil is a threat the 19-country eurozone
close such a large gap fu- could do without. The health of its trading partners is
crucial for the region, which spreads from Ireland in the
northwest to Cyprus in the southeast. China has been
a key buyer of European goods and services over the
past few years. Without China, the eurozone would
have suffered even more than it did during its debt cri-
(AP Photo/Ng Han Guan) sis of the past six years.
On the plus side, the eurozone is in a better place than
eled fears it might lead it has been for years. Growth is solid, unemployment is
falling and — whisper it quietly — concern that Greece
weakening China’s econo- might fall out of the euro has dropped off the radar.
my and reducing the sup- A series of reports on the eurozone economy this week
ply of money to support have provided a clearer picture of a region on the
share prices. mend — the global economy permitting.
Thursday’s exchange rate
of 6.5646 yuan to the dollar HOPES GROW
The transition to 2016 has been marked by positive
2011. economic data that has raised hopes of a more buoy-
“The government hopes to ant economic recovery. In the two and a half years
see the yuan depreciate to since the eurozone recovered from its longest-ever re-
stimulate exports and the cession, growth has been tepid, and that’s kept unem-
economy, but the speed ployment high. In 2015, growth picked up to a quarter-
of depreciation went too ly rate of between 0.3 percent and 0.5 percent. That’s
fast,” said analyst Zhang still not enough to quickly generate more jobs.
Gang of Central China Se- Now, there are indications of a step-change.
curities. On Wednesday, a survey of the manufacturing and
The White House said the services sectors by financial information company
U.S. was closely monitoring Markit showed growth in the fourth quarter running at
China’s currency. White its highest level in 4-1/2 years. Its chief economist, Chris
House spokesman Josh Ear- Williamson, said the region is “well placed to enjoy a
nest said the U.S. approach year of robust expansion” and noted that many firms
to the uncertainty was to are set to take on staff in increasing numbers.
continue pressing China Similarly good news came Thursday from the Europe-
to speed up the pace of an Commission, the EU’s executive arm, which said its
economic reforms he said economic sentiment indicator for the region is also run-
would benefit China long- ning at a 4-1/2 year-high. And the EU’s statistics agen-
term and help the global cy found that unemployment across the eurozone fell
economy. q by 130,000 in November to below 17 million for the first
time in four years. There’s still a long way to go, though:
the jobless rate stands at 10.5 percent, around double
the rate in the United States.
NOT ALL IT SEEMS
The worry would be if the eurozone weren’t showing
signs of improvement. After all, it has enjoyed strong
tail winds in recent months. Sliding oil and commodity
costs have given consumers and businesses more to
spend while the lower euro has been a boon to export-
ers. And the European Central Bank has embarked
on a monetary stimulus program that is designed to
keep a lid on borrowing rates. Whether those advan-
tages continue this year will largely determine wheth-
er burgeoning optimism in the eurozone translates to
higher growth. One disappointing point is that retail
sales have dipped modestly for three straight months
through November. That’s been a surprise, given that
consumers’ disposable incomes have been swelled by
lower prices at the pump.q