FXStreet (Delhi) – Richard Koo, Chief Economist at Nomura, suggests that the recent fall in global markets and especially Dow Jones was not triggered by turmoil in Chinese markets as these markets are not open enough to cause any impact at a global scale.
Key Quotes
“The slowdown in China is not something that suddenly surfaced in the last few weeks; it has been quite conspicuous for nearly half a year, particularly to anyone watching global commodity prices.”
“The local authorities’ botched attempts to stem the stock market correction have also been frequently cited. Some of their efforts did in fact reveal a lack of understanding of market dynamics. Nevertheless, the Shanghai stock index is still trading higher than it was for the four years from December 2010 to November 2014.”
“Additionally, the fact that capital flows have yet to be fully liberalized in China means there are numerous constraints on the movement of foreign capital in the local stock market. With so many constraints, there is simply no way that developments in the Chinese markets could have triggered a 1,000-point drop in the Dow Jones Industrial Average.”
“If China’s stock market and other financial bourses were fully open to the world, it might be possible to argue that foreign investors who had incurred heavy losses in China sold assets elsewhere to compensate. But the markets are not open enough to have that kind of global influence.”
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