Are Chinese authorities losing market trust? Partner and Director of Investment at PFP Wealth, Tim Price, joins Zak Mir and Alessio Rastani in the Tip TV studio to discuss the China’s lack of credibility, and the losses from panic selling.
Death by 1000 cuts
With China’s three consecutive days of cuts to the value of the Yuan this week, speculation still remains that these will continue until they reach the minimum of a 10% cut. This casts more doubt on figures and reports coming out of China; with the Government losing trust from the market due to both their credibility and their actions, which warn of deflationary pressures, said Time Price.
Panic Selling: Confidence required to ride the storm
Price looked at the effects of panic selling, defined as selling after a 2% fall on the day and re-entering the flat/rising market 20 days later. The results show surprisingly, that quite a large amount of potential profit is lost as a result of deep-seated fear of short term volatility. Price refers to it as a standoff between time in the market vs timing in the market, with the advice that sometimes it’s worth the risk of braving the storm.