Saturday, September 12, 2015

China dominates the scene - TDS

FXStreet (Guatemala) - Analysts at TD Securities explained that China continues to dominate the scene. The CNH-CNY spread has come to the attention of the PBoC that has started to implement measures to narrow the gap.

Key Quotes:

"The spread has consequently collapsed from 1000 pips to around 130 pips over the past two days. We will see on Monday how things develop there, but tweaks, curbs or new rules for the onshore market have now become the norm.

So for example, China is planning the introduction of stock-market circuit breakers that would limit the extreme volatility recently observed. Under the plan, a 7% move by the CSI300 would halt trading for the remainder of the day, while a 5% swing would trigger a 30-minute break. These rules are meant to apply to stocks, options and index futures, with the addition of convertible bonds and some other equity related instruments.

So the message is clear: don’t mess with China! Further market liberalizations may and will be implemented in the future, but they will follow Chinese authorities’ rules and pace, not the market’s.

While anxiously waiting to see what’s in store for next week, we start preparing for the FOMC decision on Thursday. Most of the short term risks continue to revolve around this announcement and its implications. Next week, most other considerations will be of secondary importance."
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