As has been the case for the past five sessions, Chinese equities had a volatile trading day today, as investors there attempted to gauge the impact of Beijing’s moves to stop the dramatic sell-off. After opening up initially, the Shanghai Composite index finished the day down 1.3 percent, with a spread of nearly 8 percent between the trading session’s highs and lows. One day after the People’s Bank of China made a rate cut, the China Financial Futures Exchange increased margins and fees while restricting sales of some equity index contracts. Policymakers in Beijing continue to attempt to find scapegoats for the market crash, with new probes into short selling and comments by PBOC analysts to official state media attributing the volatility in global financial markets to U.S. central bank policy expectations.
Energy sector megamerger announced. French-U.S. oilfield services provider Schlumberger announced the acquisition of Houston–based Cameron International Corp. for $15 billion in cash and stock. According to the statement issued today, the combined company will save as much as $900 million during the first two years by reducing operational redundancies.
Regulators nix utility merger. Yesterday the Public Service Commission of the District of Columbia denied permission for the proposed $6.9 billion merger between Chicago–headquartered Exelon Corp. and Washington–area electric company Pepco Holdings. The commission ruled that the merger would not be in the public’s best interest. Five other regulatory agencies had already given the green light to the deal. Pepco shares declined by more than 15 percent in response. The two companies have a 30-day window in which to appeal the decision.
Japanese stocks rally. In its largest gain year-to-date, the Topix index rose by 3.2 percent to 1,478.97 in trading today in Tokyo. The mood of investors turned positive on hopes that the most recent PBOC rate cut will spark greater demand from Japan’s largest trading partner.
Portfolio Perspectives: Assessing the State of Emerging Markets
“In the past, emerging-markets economic growth was heavily tied to global trade via exports and commodity production. As global trade has slowed, the tide has gone out. We are now seeing which countries are able to grow without external demand. We expect those countries with more sustainable growth models to be rewarded with continued foreign capital flows into both domestic investments and capital markets.”
Charles Wilson, co-portfolio manager of the Thornburg Developing World Fund, Thornburg Investment Management, Santa Fe, New Mexico
“In investment-grade corporate credit, the Markit iTraxx Asia ex-Japan investment-grade index widened 10 basis points to reach 141 basis points Monday; the highest level since March 2014. This was hardly groundbreaking, as the index surpassed this level on numerous occasions from mid-2013 to mid-2014, at the time of the so-called taper tantrum. Back then, fears stemmed from what was wholly a credit problem, with minimal impact on the stock market.”
Neil Mehta, fixed-income analyst, Markit, London
