Marcus Ashworth, Head of Fixed Income at Espirito Santo Investment Bank came by this morning to offer his enlightened views on the current state of the market.
China back in meltdown mode
Starting with China, he began by highlighting that the market is down -8.5% overnight, the biggest decline since February 2007, and that 64% of A Shares are limit down, on top of the 650 stocks already suspended. Ashworth believes that it is only a matter of time before more suspensions follow.
Considering what led to the fall, he believes that a string of soft data has compounded on an already unstable market and when the Government failed to step in to protect the 4000 level, momentum gained steadily, and the situation is probably outside of the Governments control.
Chinese GDP closer to 3% than 7%
Richard Hunter, Head of Equities at Hargreaves Lansdown (LONDON:HRGV) added that he felt it was difficult to even consider China a real market, and that many investors were starting to look at Hong Kong. Further, he has heard that real Chinese GDP may be closer to 3% than the 7% touted by Government officials.
Germans still pushing for Grexit
Moving to Greece, Ashworth is expecting a resumption of instability in the future, noting that the beleaguered nation is already bickering with the Troika and may miss a pending payment, despite the bailout and that ultimately the ECB are holding the cards as to when the banks and the market will open again. He feels that the Germans are still pushing for a Grexit and notes that of all the solutions being proposed, the key theme is that the answer is perceived to be more Europe.
Fed to postpone rate hike?
Casting an eye to the US, Ashworth flags the story regarding Fed employees leaking dovish forecasts. These were lower than expected and as such feels that the Fed won’t hike in September due to a contrast in the numbers.