Stocks Archives - Economy Watch

Are We Still Watching the January Effect?

So far, it has not been a happy new year for equity market investors. The Australian equity market lost A$100 billion in market value in the first week of trading, mirroring a dire global trend.

If we are to believe the “January barometer”, things may be about to get worse. The basis for the January barometer is the belief that when the equity market ends in the black for the month of January, the subsequent year will be prosperous for equity markets, while a negative equity market return in January signals a bearish year for stocks.

Understanding the Function of the Chinese Equity Market

The sharp decline in Chinese stocks and the policy response is important for global investors but not on the grounds commonly cited. It is unlikely to have a major impact on the Chinese economy. It is unlikely to be a key factor in the IMF’s decision regarding the composition of the SDR basket.

China does not have an equity culture. Equities account for about 12% of Chinese household financial assets. It is lower than the major economies and compares with 58% in the US.

China Stock Crash Instills Fear, Uncertainty

Chinese stocks posted their largest drop in eight years as the Shanghai Composite lost 8.5% in one day of trading.

As stocks fell in Shanghai, other Chinese stock indices also posted major losses, with the Shenzhen Composite losing over 7% and the Hang Seng losing 3.3% in Monday trading, reversing much of the recovery Chinese markets saw in early July.

Mining Social Media for Market Insights

The European Central Bank has been particularly busy. It is engaged in an asset-buying program. Despite a European Court of Justice ruling highlighting the conflict of interest between its bank supervisory function and role as creditor, the ECB is still part of the Troika official creditors and participated in the marathon negotiating sessions over Greece.

The ECB is closely monitoring the situation at Greek banks. It has not increased the ELA ceiling for the second consecutive week, following the Greek government’s acceptance of the creditors’ demands.

Gauging the Need for Panic over Chinese Equities

The Chinese authorities moved decisively on many fronts last week to put a floor under the collapse of Chinese stock markets. ChiNext, China’s NASDAQ, was plummeting from astronomical heights. The CSI 300 index of China’s biggest listed companies, which had soared more than 150 percent over last year’s levels, plunged almost 40 percent in little more than a month before moves to prop up the market halted the fall.

Small-cap Stocks Still Outperforming S&P 500

Stock markets have shown some interesting trends so far in 2015, and most of those trends have been bullish in nature. However, some stock sectors have benefited more from this optimism than other sectors, and the overall developments might be surprising those most heavily invested in traditional assets. If we look at the major financial news headlines, most of the attention has been on indices like the S&P 500 or the NASDAQ 100 (which recently surpassed highs not seen since the tech bubble of 1999). However, when we compared the year-to-date performance of these bench

Last Year’s Investment Strategy is Struggling in 2015

For global equity investors what worked so well last year is struggling to work this year. Last year, the S&P 500 was the place to be. It gained nearly 11.5%. The Dow Jones Stoxx 600 was up 4.3%. The MSCI World Index that covers the developed markets rose just shy of 3%. MSCI Emerging Market equity index lost 4.6%.

This year is a dramatically different story. As this Great Graphic, composed on Bloomberg shows, the Dow Jones 600 has exploded (fuchsia line), rising a little more than 16% in Q1 15.

Market Stabilization has Yet to be Achieved

The US equity market was unable to sustain early gains yesterday and, although several Asian markets posted minor gains, Europe is seeing red again today. US equities are called lower as well. The European bond market rally continues, except for Greece, where the 10-year yield rose to about 70 bp over the past five sessions.

Alibaba set to price IPO shares amid surging investor demand

Alibaba Group Holding the chinese e-commerce giant will sell $22 billion of shares on Thursday, finalizing a two week road show that pulled interest from world-wide investors and will likely be the world’s largest initial public offering.

Alibaba shares will be priced after the markets close at 4pm. Thursday and will trade on the New York Stock Exchange on Friday with the ticker “BABA.”