China: Stock market rout kicks off 2016 – ING

By FXStreet FXStreet (Delhi) – Prakash Sakpal, Economist at ING, thinks it will take strong policy response to reduce hard-landing worries and subsequently better activity data to restore investor confidence in risky assets for China.

Key Quotes

“December manufacturing PMI caused already-elevated China hard-landing fears to spike. The ripple-effect of 7% Shanghai Composite selloff in Asia spread to Europe and then to the US, mirroring a similar volatility spike that hit the global markets last August after a shock devaluation of CNY. The positioning for the forthcoming lifting of the six-month selling ban on major stockholders imposed last August was also a factor.

The spot USDCNY appreciated 0.6%, the biggest single-day move since October. The offshore USDCNY premium to onshore spot rate spiked to 1.48% from Friday’s 1.17% and is close to its August high.

The official Xinhua News agency downplayed the selloff on the first trading day of the year becoming a norm. We think it will take strong policy response to reduce hard-landing worries and subsequently better activity data to restore investor confidence in risky assets.”
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Source:: FX Street