Prospects Daily: Chinese shares rally on Shanghai-Hong Kong …
Financial Markets
China stocks surged and led the most of Asian shares higher on Monday, after regulators announced a long-awaited stock trading link between Hong Kong and Shanghai will start next week. The Shanghai Composite Index advanced 2.3% to the highest level since November 15, 2011, while the Hang Seng Index gained 0.8%. The so-called Stock Connect trading scheme will allow global funds to buy into an estimated $2 trillion worth of mainland stocks. It is one of China’s major efforts to open up its tightly-controlled capital markets.
The Financial Stability Board (FSB) proposed today that the world’s largest banks may be required to have total loss-absorbing capacity equivalent to as much as quarter of their assets, as regulators tackle the threat posed by banks that are too big to be allowed to fail. The plans envisage big global banks such as Goldman Sachs and HSBC should have a buffer of bonds or equities equivalent to around 16% to 20% of risk-weighted assets from January 2019. Proposed new rules are the latest attempt by global regulators to ensure that bank creditors rather than taxpayers bear the majority of losses when a big lender fails.
High Income Economies
The Sentix research group’s Eurozone index, measuring European investor sentiment, improved to a -11.9 for November, compared to -13.7 in October and expectations of -13.5 from economists polled by Reuters. The assessment of the current situation further worsened, but six-month expectations were markedly up with the latest actions by the Bank of Japan and European Central Bank raising hopes they can stimulate economic growth.
After the ruble depreciated to record lows against the U.S. dollar and the euro last week, the Bank of Russia announced that that it was abandoning the currency’s trading corridor and regular foreign currency market interventions, thereby allowing it to float freely. However, the bank kept its commitment to make foreign exchange interventions in case it sees threats to financial stability. At the same time, amid the slump in oil prices and Western sanctions, the Bank also cut the growth forecast for the Russian economy, predicting zero growth for the next year and just a 0.1% expansion for 2016.
Developing Economies
East Asia and Pacific
China’s consumer price index (CPI) remained near five-year low of 1.6% (y/y) in October, unchanged from September, adding concern that domestic demand remains lethargic despite a range of stimulus measures. On a monthly basis, CPI was flat following the 0.5% rise in September. Meanwhile, producer price index (PPI) tumbled 2.2% (y/y) in October, sharper than a 2.0% decline expected by economists and following a 1.8% decline in September.
Europe and Central Asia
Turkey’s industrial production rose more than expected at seasonally- and calendar-adjusted 1.7% (m/m) in September, recovering from a revised 1.1% fall in August, data from the Turkstat showed. Production of durable consumer goods surged 6.9% rebounding from a 5.7% fall in September, while intermediate goods production and capital goods production gained 2.4% and 1.8%, respectively. On an annual basis, however, industrial production grew less-than-expected 2.2% in September from economists’ forecast of 4.1% and from 5.2% growth in August. It was the weakest annual increase since June, suggesting that economic stagnation in Europe and the ISIS-led crisis in Iraq was taking a toll on the Turkish economy.
Romania’s industrial production expanded in September at seasonally and working-day adjusted 2.4% (m/m), rebounding from a 2.7% contraction in August, data from the National Institute of Statistics showed. On a yearly basis, industrial production climbed 4.9% in September following a 4.7% growth in August. Capital goods production grew 11.7% and intermediate goods production grew 3.9%. In the first nine months of the year, industrial production gained an adjusted 8.5% from the same period a year ago.
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Prospects Daily: Chinese shares rally on Shanghai-Hong Kong …
