China's new stimulus plans make a splash in global markets
LONDON, Sept 25 (Reuters) -China-exposed assets jumped on Tuesday after Beijing announced its biggest stimulus since the pandemic in a bid to pull the world's second-largest economy out of the deflationary funk that has shaken global currency and equity markets this year.
The broader-than-expected package offers more funding and interest rate cuts.
European stocks, emerging-market currencies and commodities lapped up the news, but analysts questioned how effective it would be in the longer run, given extremely weak credit demand from domestic businesses and consumers.
Here we look at five places where China's economic weakness has been particularly felt, and what these new measures might mean.
GOING UNDERGROUND
Bruised mining stocks were the biggest gainers in Europe and Australia on Tuesday.
"The stimulus measures may support the property markets more than broader consumption or industrial activity and so it is no surprise that the depressed mining stocks are outperforming," said Gerry Fowler, head of European equity strategy at UBS.
"It remains to be seen if these measures are sufficient to ignite more private sector optimism. History would suggest fiscal rather than monetary measures are more effective."
An index of European mining stocks rose 4.6% .SXPP its biggest daily gain in two years, while Australian mining stocks rose 2.8%, logging their largest daily rise in a year.
Both have been under pressure in recent months.
HEY, BIG SPENDERS
Shares in European luxury retailers, popular with China's once-big spending urban middle class professionals, have been among the most obvious victims of economic weakness in the world's second largest economy.
A benchmark of European luxury stocks is down 4.2% year to date .STXLUXP versus a 7.7% rise in the STOXX 600 .STOXX.
However, that same benchmark jumped 3% on Tuesday on the back of the new measures. If sustained that would be its biggest one-day jump since January.
Analysts at RBC say within the luxury sector, the revenues of Swatch Group UHR.L, Burberry BRBY.L and Richemont CFR.S are the most exposed to China. Their shares were up between 2 and 5% on Tuesday.
U.S. shares have reacted less than European, with the S&P 500 .SPX down 0.1% at 1455 GMT.
"There, you have an economy that is much less geared to China demand, in Europe this kind of gearing is way more," noted Andreas Bruckner, European equity strategist at Bank of America.
TRADE IN DEUTSCHLAND
China is Germany's second-biggest trading partner after the United States, so many of its companies suffered as demand for cars and machinery weakened while competition from Chinese domestic rivals grew, an additional drag on an economy already reeling from an energy crisis triggered by Russia's invasion of Ukraine.
If China's new measures help stabilise the real estate market, this would have a positive impact especially on the German chemical sector, said Uwe Hohmann, equity strategist at Metzler Capital Markets.
German carmakers like Volkswagen VOWG_p.DE and BMW BMWG.DE and auto part suppliers are facing more of a structural issue due to competition with local rivals, and thus a stabilization in the market would affect them less, Hohmann said.
COMMODITY EXPORTERS
China has been an engine of growth for emerging markets near and far, sucking in especially their commodities and oil exports in boom times whenever the world's number two economy gets a shot in the arm.
But this time might be different.
"There is still no major fiscal stimulus directly aimed at the anaemic consumer, which remains the key constraint," said Hasnain Malik at Tellimer. "Therefore, (the) package again falls short of the 'bazooka' stimulus that will alter the outlook for global commodities demand."
Yet economies geographically closer to China and that have close trading ties with the country could see some tailwinds - as could those holding their domestic government bonds, said Charu Chanana, strategist at Saxo Markets in Singapore.
The stimulus is also coming hot on the heels of a super-sized U.S. Federal Reserve rate cut, which generally marks a sweet spot for emerging economies.
ANOTHER FX PERSPECTIVE
China's yuan hit its highest in 16 months, defying the conventional pull of gravity in the FX market, in which stimulus and lower rates tend to translate into a weaker currency.
But the prospect of a boost for the country's massive economy and its markets is enough to get people flocking.
China-sensitive currencies like the euro EUR=EBS, Australian dollar AUD=D3 and Malaysian ringgit MYR= - which has vaulted to three-year highs after Beijing's burst of stimulus - are all likely to gain a foothold against the dollar, as investors favour more cyclical currencies.
But it's the "reflation trade pair", the euro against the Aussie dollar, that could act as a better gauge of how successful investors believe China's efforts are, according to a number of analysts.
Euro/Aussie EURAUD=R was up on Tuesday, on shifting Australian rate expectations, but has been trending lower, dropping 5.5% in seven weeks, compared with a 1.6% rise in euro/dollar and a 0.8% rise in the euro/onshore yuan EURCNH=R.
European luxury names underperform https://reut.rs/3BqGjww
Trading China https://reut.rs/3THfMkX
European auto stocks feel chill from China https://reut.rs/3XVlnqo
Going deeper underground https://reut.rs/3Zv6aO6
EM portfolios see $30.9 billion inflow in August https://reut.rs/3BfgejZ
EM portfolios see $30.9 billion inflow in August https://reut.rs/4dccvkC
Reporting by Lucy Raitano, Amanda Cooper and Karin Strohecker in London, Linda Pasquini in Gdansk and Sruthi Shankar in Bengaluru; Compiled by Alun John; Editing by Alexandra Hudson
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
