China’s all too apparent slowdown is all the rage. The Shanghai Composite lost more than a fifth of its value over the five days to Wednesday August 26, with record one-day plummets witnessed Monday and Tuesday. China’s steel industry, which in recent years seemed to become untouchable as it shipped product the world over, is now gaining more attention from importing countries and soon could also feel the crunch of recent market changes. The People’s Bank of China announcing capital reserve cuts and lower interest rates seemed to do little to change the tide, as was the case with the previous interest rate cut announcement in June — then the Shanghai Comp shed more than 3%, compared to 1.27% Wednesday. Macquarie Bank said the reserve and interest rate cut would release as much as Yuan 700 billion ($109 billion) into the country’s financial system. On Wednesday the PBoC said it would inject a further Yuan 140 billion into the financial sector to bolster liquidity; since Beijing devalued the yuan, capital has been exiting the country. Some say China has been one of the biggest ever beneficiaries of the carry trade; that is, where investors borrow money at low interest rates to … continue reading
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Source: CTRM Center