Chinese Stock Markets Spooked By Greenspan, Declines From Record Trade
On the heels of a gloomy forecast pitted by former Federal Reserve Chairman Alan Greenspan, equity shares in China fell from a record close just the day before. Noting that Chinese equities may undergo a “dramatic correction”, Greenspan stated that the current rally “is clearly unsustainable”. Incidentally, the comments, made from a conference in Madrid by satellite, hark back to similar warnings by the former Fed policy maker when he noted American equity markets were displaying irrational exuberance. Traders will remember that,although it did require about 4-5 years to take effect, the voiced concerns did come true as the tech bubble eventually burst, leaving many holding the bag. Concerns over a repeat of the recessionary start surged through shreas in Shanghai, turning the benchmark?s earlier gains into the red by the end of the session. The benchmark CSI 300 index dropped 0.4 perecnt to 3,912.67 as bellwether shares helped to suppress market optimism. Notably, however, brokerages were a positive for the day, with Citic Securities Co. gaining shortly after announcements by US Treasury Secretary Henry Paulson that the US will have access to the industry.
Yuan Remains Relatively Unchanged After Zhou Notes Gains Appropriate
The yuan market stopped on a dime after central bank Governor Zhou Xiaochuan noted that gains in the currency were “already moving fast enough”, dampening expectations that further flexibility may be seen in the short term for the Chinese currency. The statements essentially reversed, albeit temporarily, speculation even as US legislators have pledged to continue with trade sanctions on Chinese imports set in the beginning of the year. The decision to proceed widely reflects comments by US Treasury Secretary Paulson at the end of a two day meeting with Chinese officials. Shortly after agreeing to the opening of the financial services and aviation sector to the US, Paulson noted that changes inclusive of the recent band widening were “incremental” as more is needed to dampen “anti China sentiment”. Ultimately, Chinese officials are likely to deal with the current economic predicament on their own, as proven in the past, moving the band and the currency forward at their own pace. According to Zhou, the current exchange rate changes are “going well”.
China Requires Brokerages In Warning About Market Risk
As a result of rampant equity speculation in the country, it was announced today that China?s securities regulator is ordering regional brokerages to keep up programs in educating investors about market risk. Much like in the US, investors are now obligated to sign caveat emptor declarations, acknowledging the awareness of risk in investing according to the website by the China Securities Rgulatory Commission. The move is reflective of a maturing financial market as interest has peaked in local stock investments.
Singapore Stocks Decline Below Record Close
With Hong Kong stock markets closed for a regional holiday, the focus was placed on Singapore?s stock market. Falling from a record on the session, the Straits Times Index came under pressure as profit taking once again crept into the market. Leading shares in to the red was stock in DBS Group Holdings. Although rising in the past week, shares of DBS were hammered as investors saw recent strength as overexceeded, likely more than compensating for near term growth prospects. Keppel Corp, the world?s largest builder of oil rigs, also fell on the day. Shares in the company dropped 40 cents to trade 3.5 percent lower at S$11.10 in the overnight as technical selling plagued the issue. As a result, coupled with China market contagion, the benchmark index lost 28.75 points to close lower at 3,530.26, the biggest one day drop since May 8th.