I appeared on Channel News Asia again this morning at 6:20am SGT. My questions and my responses in the form of brief notes are below:
Q1. The latest trading glitch on the NYSE comes as investor sentiment is particularly fragile, does it enlarge the already wild swings across global equities?
It isn’t great timing however I don’t think it will impact much. Lots of NYSE stocks traded on other exchanges like the Nasdaq so it wasn’t a big drama. I was listening to the NYSE President this morning and they did the right thing. They had a minor glitch and they want everything running 100% for confidence in the market. This will be forgotten quite quickly.
Q2. Will the stock-market crisis in China evolve into a financial crisis?
Let’s hope not. The recent price action in China stocks is nothing other than pure speculation – almost like a casino. They surely don’t reflect the true values of the companies. I think most are looking into China and thinking the same.
Q3. Do you have faith in the Chinese government’s ability to halt the losses?
I am not so sure. One of the roles of governments and regulators is to instill confidence in financial markets and financial systems and I am not sure what Beijing did recently achieved their desired outcome. If that continues, I will lose more faith.
Q4. Participation by foreign investors is limited in China’s markets. Will the rout spill into other Asian markets?
I don’t think so. I think most are looking at China and seeing a gaming like environment. We can only hope it remains isolated and doesn’t spill over. We have seen steady declines in the last few months in the Straits Times Index and likewise in the ASX and these have been very normal moves.
Q5. Will China’s falling stock prices hurt Australia’s exports to its largest trading partner?
For a number of years now we have spoken about the end of the mining boom. That is no longer a surprise. It comes down to whether people think the China stock prices reflect true value to the companies. Most wouldn’t think so. There isn’t much companies can do about their stock price on a day to day basis. If those companies are still sound, I can’t see a major impact.
Q6. The RBA left the cash rate at 2% on Tuesday, can we expect any more moves from them this year?
No I think they will sit out the rest of 2015. I think this is a widely held view. Obviously they will continue to meet every month but I can’t see them moving any time soon.