When is a crisis not a crisis?
What a lot of fuss over nothing. At least that’s the view from bankers in Asia when asked about the recent turbulence in the region’s stock markets.
Tonnes of ink – or should that be megabytes – have been spent on the plummet in China’s exchanges and the impact that has had on its neighbours and the rest of the world. But the view from Hong Kong is more of a shoulder shrug than frantic arm waving.
Why? Well, the shockwaves from anything China-related tend to be stronger away from the epicentre. Those able to take a closer look don’t see much to panic about. First, slowing China growth has been well flagged for a long time. Yes, the government has taken action to stem that but what government wouldn’t? And all of that does not undermine China’s long term potential.
Yes, there was a devaluation in the renminbi, but 1%-2% moves are quite normal for a lot of currencies and hardly worth mentioning in the context of a double digit appreciation this year.
It’s also important to remember that this is the capital markets’ silly season. Fundamental investors are away from their desks and trading volumes across the region are down anywhere from one third to a half, so the recent moves are not reflective of true market sentiment.
If you work with China every day, you learn to factor in a certain amount of turbulence and uncertainty — it’s part and parcel of the job. That’s not to say the rout is not causing problems. The bond market has shut and the upcoming pipeline of Hong Kong IPOs, many of which are for Chinese companies, is looking less certain than it was a few weeks ago.
Nonetheless with a few weeks before the markets get back to normal, it’s too early to press the panic button. The real test will come in September.