August 14, 2015

The Yuan's Shadow: A Mixed Week For World Markets (Investor's Business Daily)

August 14, 2015


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China’s abrupt devaluation of its yuan made for a tough week for a lot of markets — currencies, commodities and stocks — worldwide. Where were the winners and losers?

China’s mainland markets were the most obvious winners. The Shanghai Composite rose 5.9% for the week. The smaller and more tech-centric Shenzhen Composite soared 6.1%. The result left the Shanghai index 23% below its June 12 high, but 18% above its July 9 low of 3373 and with a year-to-date gain of 23%.

Shenzhen ended 27% off its high, 25% above its low and up 63% since Dec. 31.

Massive government intervention, including the currency intervention, is assumed to have played a key role in the mainland gains. Hong Kong, meanwhile, saw its Hang Seng index end the week down 2.2%, 16% off its high and ahead 1.6% this year.

Sellers ruled essentially all of the exchanges outside China.

U.S. markets showed one of the best performances among global markets, with the S&P 500 up nearly 1% for the week and the Nasdaq down a fraction.

In Europe, the Greek parliament’s approval of a bailout deal and a surprise gain in Q2 GDP helped the ASE Index in Athens shave only a fraction of its value for the week. That left it down 18% since reopening on Aug. 3 after a monthlong closure.

The Sensex benchmark for India’s Bombay Stock Exchange climbed nearly 2% Friday to end the week down 0.6%. Stocks gained as the rupee rebounded from a 23-month low and as data raised hopes that India’s central bank will trim interest rates in September. But Icici Bank (NYSE:IBN) fell nearly 4% in fast trade last week.

Currency was also a key factor in Indonesia and Malaysia. The Bursa Malaysia Index in Kuala Lumpur bounced 1.5% Friday, ending the week down 5.1%. A flat performance by the Jakarta Stock Exchange Composite on Friday left the index down 3.8%.

Malaysia’s ringgit and Indonesia’s rupiah each swept to 17-year lows vs. the dollar on Thursday.

France and Germany were hit hard. The CAC-40 in Paris slumped 0.6% Friday for a 3.8% loss for the week. Frankfurt’s DAX shed 0.3% Friday, ending the week down 4.4%.

Preliminary eurozone GDP growth estimates released by Eurostat Friday showed a smaller-than-forecast 0.3% gain, with France’s economy effectively flat and growth in Germany lagging expectations.

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