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19 Dec 2013
China's credit fears on the rise
FXstreet.com (Bali) - On the back of a surprising Fed announcement, finally kick starting its long-awaited taper ($10 bn monthly reduction to $75 bn), another concern for Asian investors is the tighter financial conditions in China.
It is not just the potential negative effects of further 'hot money' (courtesy of the Fed's QE) exiting the Asian markets, but the increase in China's interest rates are also bringing back memories of this mid-year's cash crunch, which led to some severe panic selling in emerging markets.
Understandably, traders in Asia are monitoring this situation very closely, and while fairly stable trading has been conducted in Asia, the last few hours saw the AXJ (Asia ex-Japan) complex under slight pressure on Chinese fears.
According to Sonali Desai, Analyst at IFR Markets: "With the PBOC opting to skip open market operations for a 5th straight session despite yesterday's jump in the 7-day repo rate, funding fears are likely to persist into what was expected to be a period of ample liquidity."
It is not just the potential negative effects of further 'hot money' (courtesy of the Fed's QE) exiting the Asian markets, but the increase in China's interest rates are also bringing back memories of this mid-year's cash crunch, which led to some severe panic selling in emerging markets.
Understandably, traders in Asia are monitoring this situation very closely, and while fairly stable trading has been conducted in Asia, the last few hours saw the AXJ (Asia ex-Japan) complex under slight pressure on Chinese fears.
According to Sonali Desai, Analyst at IFR Markets: "With the PBOC opting to skip open market operations for a 5th straight session despite yesterday's jump in the 7-day repo rate, funding fears are likely to persist into what was expected to be a period of ample liquidity."