‘When China sneezes, the world catches a cold’ – the unfolding of recent events has proven that true; but pockets of opportunities still exist if you know where to look.
Text by Jan Yong
2016 started on panic mode with a Chinese stock market crash followed by falls in global stock markets, wiping off an estimated USD2.6 trillion from global markets in a matter of four days. Such is China’s impact on world markets that whatever it does is being watched closely and analysed to death. After all, China has been the engine of the world’s growth for the last 10 years. A slowing economy in China means less money for everyone, hence less consumption especially high end and big ticket items including real estate. An analyst has even pointed out the crash could spell the end of a huge property-based debt-fuelled boom in China.
That aside, at the time of writing, the markets have stabilised slightly after China strengthened its currency, alleviating fears of further Yuan devaluations. A Yuan devaluation would trigger competitive devaluations among its trading partners; it is a good and bad thing. Good for China’s exports which will be more competitive but bad for its asset values. It may trigger more outflows of money from China. Its trading partners would similarly embark on competitive devaluations to compete with China, hence lower asset values across the board all over the region.