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But the same joy cannot be said for the financial markets, which have been tossed about this week by a double whammy of the Greece crisis and China stock rout.
We started the week on an extremely negative tone, after a majority of the Greek public voted ‘no’ to more austerity measures. Many market watchers were blind-sided by the Greek crisis, in my opinion, the much bigger risk was in China.
This explained why we are seeing the Chinese stock market rout very quickly replacing Greece as the main focus for market participants.
The falling share prices in China is hurting commodity prices, which in turn dragged on commodity-linked currencies. But perhaps there is some feel of a fairy-tale ending near the tail-end of the week, where risk appetite noticeably improved.
In Europe, Bloomberg reported that Greece came out with a reform proposal, more in line with the creditors, which boosted prospects of a bailout deal happening on Sunday. Admittedly, there is still some hoops to jump through, given that the Greek Parliament still needs to approve the new plan.
This may be the key obstacle, given the ‘no’ result from the referendum. Greek PM Tsipras’ seemingly turnaround to produce a reform plan similar to the creditors' demands, leaving quite a number of media punters scratching their head in confusion.
Meanwhile, Chinese stocks appeared to have made a turn for the better, after Chinese authorities shove orders and restrictions down the throats of many companies and funds. The Shanghai Composite is seeing the best two-day gain since 2008. In fact, it posted the first weekly gain after three weeks of losses.
Given the drastic measures, I remain sceptical on the ‘rebound’. The laundry list of support measures include a QE-like initiative, where PBOC is providing liquidity to the China Securities Finance Corp to provide margin trading. Banks are also allowed to roll over loans with stocks pledged as collateral, which addressed the concerns of a messy sell-off as a result of further share price falls and the lenders decide to call in the loan.
Naturally, the second positive close in the Chinese markets beg the question of ‘have we reached the bottom’. I feel the government measures have distorted the normal functioning of the equity markets, so if you look at it in that sense, maybe the sharp correction in Chinese equities could have reached its end.
Valuations have fallen to more realistic levels and margin debt has drastically narrowed. You also have Fidelity joining Goldman Sachs in saying that it is a good time to buy back into Chinese equities. But the next step of unwinding the measures, as well as suspended stocks resume trade will be the key thing to watch if the recovery is able to stand on its own. Of course, I expect authorities to normalise the situation in a gradual manner, which could keep markets in a more orderly fashion.
The reality is that we are likely to see a stabilisation period (which itself is not a bad thing after the three-week tumble) over the coming weeks or months more than anything else.