It was a relatively quiet week around the globe with only a few points of note to mention.
Global equities were resilient despite gyrations in the Chinese equity market on Monday; the smaller companies ChiNext Index flirted with the 10% lower limit before closing the day losing 5.1%. The heavily technology-based index fell following Chinese President Xi Jinping comments at the National Financial Work Conference where he urged regulators to strengthen supervision. This fall further compounded the index decline which has fallen steadily since April when Chinese authorities began to force banks to rein in off-balance sheet lending. Chinese bourses which consist of larger companies were less affected; the Shanghai composite fell 1.4% and the CSI 300 fell 1.1%. The chart below shows the Shanghai Composite, China CSI 300 and ChiNext performance since January 2015; the ChiNext decline is quite marked over the last few months.
It is now almost two years since Chinese equity markets fell more than 40% resulting in trading suspensions and the intervention of Chinese regulators who prevented major shareholders from selling; the MSCI’s rejection of China’s inclusion in the Emerging Market Index in the same summer also contributed to the sell off. China has made significant headway since this 2015 by replacing its equity market regulator and receiving a fillip from index company MSCI; who gave mainland stocks a vote of confidence in June this year, when it announced some of the largest mainland stocks would join the MSCI emerging markets index in June 2018.
In Europe, ECB’s President Draghi gave little away at the midweek press conference; giving no clear indication on the timing of a policy decision. It is likely that the Council will delay the decision until further inflation data is received in the coming months.
On the topic of inflation, UK data showed a decline in June to 2.6% from 2.9% in May; weak oil prices have been supportive of this downward move, despite the fall in the pound which has pushed up the cost of most imported goods.
It is likely that newsflow in the coming month will be slow as we enter the holiday period.