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Argentina databank May 3
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NEWS FLASH
UPCOMING WEBINAR - CAUCASUS AND CENTRAL ASIA: ECONOMIC UPSWINGS AND POL...
COUNTRY INSIGHTS
The power of Beijing's "brute force"
CHINA FINANCIAL · In Brief · 30 Jul 2015
Three weeks ago Beijing managed to stop the panic with the use of what I called “brute force”, by which I meant that there was never likely to be much impact from interest rate moves, regulatory changes, margin relaxation, and so on. This is because there had been such a remarkable convergence am...
How debt constrains growth in China
CHINA FINANCIAL · Report · 27 Jul 2015
Special points to highlight in this issue: The sustainability of China’s economic model and its dependence on debt has been a controversial topic far longer than it should have been, but while there is now a consensus that Chinese debt levels are very high and may put the country at risk, most ec...
July 10 – The Shanghai Composite and the Keynesian beauty contest
CHINA FINANCIAL · In Brief · 10 Jul 2015 · 3 responses
For months I have been arguing that the most worrying source of volatility in the Chinese stock market was not its speculative nature nor even the unprecedented use of margin. It was the large share of Chinese investors whose strategy was to ride what they believed to be a bubble. This to me is w...
July 10 – A collective decision to rally
CHINA FINANCIAL · In Brief · 10 Jul 2015
With the market up 5.2% by 1 pm, I think the “correction” is over. Analysts have pointed out the many reasons for skepticism, most importantly, I think, that over half of the listed companies have suspended trading in their shares. The full buying power that Beijing can command, plus the return o...
Does size matter?
CHINA FINANCIAL · In Brief · 09 Jul 2015
The Chinese stock market panic is unlikely to trigger a financial crisis in China, but not, as many argue, because of its relatively small size and narrowly dispersed ownership. What matters is that although nationally there are significant mismatches between assets and liabilities among individu...
Why do financial crises happen?
CHINA FINANCIAL · In Brief · 09 Jul 2015
Financial crises are analogous to bank runs. They occur when the liquidity needed to bridge the gaps created by mismatches between assets and liabilities suddenly becomes unavailable. Insolvency by itself is not a sufficient condition, and only leads to a financial crisis when it causes creditors...
Should the government have intervened?
CHINA FINANCIAL · In Brief · 09 Jul 2015
After a terrifying beginning with Shanghai down 3.2%, markets turned around dramatically and Shanghai closed up 5.8% on the day. But 194 more companies suspended trading today. Over half of all companies now don’t trade. As I suggested yesterday, it wasn’t the subtle measures that proved most eff...
Does the Chinese stock market crash matter?
CHINA FINANCIAL · In Brief · 08 Jul 2015
· It is hard to argue that the stock rally had any significant positive economic impact, so some analysts argue that it collapse will not impact the economy either. · This may be true in a direct sense. But there are three important ways the stock market decline might matter. The first is direct....
What can the government do to move markets move in China?
CHINA FINANCIAL · In Brief · 08 Jul 2015
· Because China’s market is highly speculative, policies that are directed at improving the fundamental value of stocks will have almost no impact on market prices. · Uncertainty is currently so high that it will have sharply undermined the ability of speculators to agree collectively on how to i...
What might cause speculators to buy?
CHINA FINANCIAL · In Brief · 08 Jul 2015
Broadly speaking speculators buy or sell assets for two reasons: 1. Some event is expected to cause, either for technical or fundamental reasons, a near-term change in the supply of or demand for an asset large enough to affect prices, even if only temporarily, and they transact in anticipation o...
What policies can stabilize the market?
CHINA FINANCIAL · In Brief · 08 Jul 2015
We must avoid the tendency to think of interventions aimed at stabilizing markets as being independent of the structure of the market. In my Peking University seminar I warn my students that because most of the world’s leading economists have been directly or indirectly trained in a tradition tha...
China’s markets are unpredictable but mechanical
CHINA FINANCIAL · In Brief · 08 Jul 2015
China’s Spinal Tap stock market is a volatility machine whose every knob has been turned to eleven. Value investors lack the tools they need to project or value cashflow, and so cannot play their stabilizing role no matter what policy enticements are implemented. Policy interventions undermine th...
Rating sovereign credit
CHINA FINANCIAL · Report · 01 Jul 2015
Special points to highlight in this issue: The recent turmoil in China’s stock markets have changed the mood among investors who expected, perhaps foolishly, that they would have a chance to get out quickly at the first sign of trouble. It is hard to say what impact this will have on investor psy...
A technical flaw in constructing the GDP deflator might be good news (sort of)
CHINA FINANCIAL · In Brief · 05 Jun 2015 · 2 responses
I've long argued that a non-disruptive adjustment would require that China's annual GDP growth decelerate by a minimum of 100-150 bps during the rebalancing period (which probably began in 2012). Reported GDP growth was 9.3% in 2011. In 2015-Q1 it had dropped to 7.0% year on year -- a sclerotic 2...
Consistent with the Distribution of Political Power
CHINA FINANCIAL · Report · 29 May 2015
Special points to highlight in this issue:Just as the development of China's banking system after the reforms of the 1980s was necessarily consistent with the institutions that governed its distribution of political power, expected changes in the institutions that will govern the distribution of ...