International Economic News
China again was the most eye-catching of the global markets this week, both in terms of the size and breadth of its trading activity, but also several key reform announcements.
China’s market is broadly flat for the week, however the Shanghai Composite did rise over 7% early in the week before falling that same amount on Thursday on record volume.
China seems to be trading record daily volume every other day at the moment, and on Thursday traded US$380bn in turnover – roughly 100x the average amount being traded in Australia at present.
From a reform standpoint, more positives came to light this week in terms of freeing up the ability of Chinese and HK citizens to invest in mutual funds across the mainland border. This follows the success of the HK-Shanghai Connect ‘pipe’ that opened early in 2015 which too allowed investment funds to invest across the mutual border.
Next week sees a very important announcement relating to whether or not Chinese mainland shares are included in the benchmark MSCI Index series – the standard index upon which fund managers are regularly compared against. An inclusion of Chinese shares is no foregone conclusion in 2015, but should it occur, will be a major liquidity positive and mark of credibility for the Chinese share-market.
In Europe, the Greek farrago bumbles along and we should expect to see more headlines next week as the next IMF interest payment falls due on Friday. On the positive, and unbeknown to most, the European economy continues to strengthen. German consumer confidence reached a 10+ year record high.
In the US, M&A activity was perhaps the most notable single feature. In the semi-conductor space, Avago announced a $30bn takeover of fellow chipmaker Broadcom, and as we speak today the press are reporting Intel will make a $15bn+ play for rival Altera.
Cheap interest rates and improving economic activity are working to bolster global merger activity, and as we alluded in the Australian piece, we see Computershare (CPU) as a major beneficiary.