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(+) Chinese Stocks Look to Hit Biggest One-Day Gain in 3 Years

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After a troublesome Q3 growth report on Friday and analysts signaling to the trade war between the US and rising interest rates, Chinese stocks rallied this Monday. In fact, not only rallied but are actually on track to make it one of their biggest gaining days since 2015.

This remarkable rebound on Monday came shortly after Beijing made significant efforts to buoy markets by reassuring investor confidence following the steep selloffs of recent weeks. By noon, the CSI 300 index of companies on both the Shanghai and Shenzhen stock exchanges was up by 4.4%. This makes for its largest gaining day in three years.

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The trend was echoed in Hong Kong, with the Hang Seng China Enterprises Index of Chinese companies also jumping by 3.3%. This would make it its best day since October 2017. Even the technology company Tencent that’s seen its profits affected by tight Chinese gaming regulations also saw a jump of 4%.

China Stocks Rally but No End to Volatility

The crippling selloffs, particularly in tech, over the past couple of weeks, look to be over, at least for today. After a dismal period that saw 23% fall from the MSCI Asia ex-Japan index, the markets are rallying back. Global Market Strategist at JPMorgan Asset Management Kerry Craig said:

“After what has been a tense and terse month for Asia equities as a whole, they’re taking a breather, but that’s not to say volatility is going away… If China sneezes, the rest of the region catches a cold. The A-shares market has suffered a significant sell-off this year, so the rebound is expected after it’s been so volatile.”

Intervention from Authorities

Monday’s bounce-back happened after an intervention from China’s central bank, the securities watchdog, and China’s banking and insurance regulator, who told state media last Friday that the authorities would take the necessary measures to help markets, and that the slump in equities was no reflection on China’s domestic economic health.

Among these measures, the central bank pledged to ensure liquidity in the banking system and the Chinese authorities revealed temporary changes to individual income tax law including special deductions.

This attempt at bolstering confidence came on the back of a weaker-than-expected third quarter growth report of 6.5%.

China’s equity market takes the lead as the worst performing major global market this year, falling 25% from its peak earlier this year, and taking a toll on its national currency. Technology stocks have fared worse recently in the region, with Tencent shares dropping by almost 40% since their height in January.

Featured image from Shutterstock.

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The Price of Gold Keeps on Rising – Who’s Buying?

Christina Comben


Christina is a B2B writer, MBA, fintech and crypto reporter with a fascination for technology and a passion for starting interesting conversations. When not at her computer you can find her surfing a wave or sipping on wine. Sometimes, at the same time.

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The Price of Gold Keeps on Rising – Who’s Buying?

Published

22 hours ago

on

October 21, 2018

By

Melanie Kramer

price of gold

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The price of gold, under higher demand, has surged over the last few days. The gold market is seeing gains over 7% in the last week, and now the third week of gains overall. So, who’s buying the precious metal and why?

Gold bullion hit $1,233.26, the highest price per ounce for two and a half months on Monday, October 20, 2018, and finished this week at $1226.49.

Gold is still an incredibly popular investment despite investor interest growing in recent years in technology stocks and cryptocurrencies. It’s a relatively stable investment and a go-to in times of uncertainty and fear of recession.

Macquarie commodity strategist Matthew Turner said on Friday to CNBC:

“Sensitivity to equity markets is helping gold at the moment.”

U.S Federal Reserve interest rate hikes are adding to fears of recession and global uncertainty. Turner added:

“We are entering a new paradigm, where any further rate hike could be a sign that the economy is overheating a bit, which should be more positive for gold and problematic for equities.”

Global stock markets have seen some big hits in recent weeks. The US markets dipped under a sell-off of technology shares and China’s massive markets are continuing to struggle under economic woes. Both the US and China are likely to suffer over this year’s trade war. Some of the money moving out of stocks and shares is almost certainly going to gold right now.

Kitco Metals senior analyst Jim Wyckoff told Reuters that the volatility in the stock markets recently has been favoring gold:

“The technical posture of gold in near term basis has improved remarkably in the past two weeks.”

A slightly weaker dollar is also aiding the price of gold. The largest gold-backed exchange traded fund (ETF), from SPDR Gold Trust, has also seen a gain of 2.5% in the past two weeks.

Russia and China are Selling US Treasuries and Buying Gold

It’s not just individual and corporate investors that are buying gold right now. Russia was in 2011 the largest holder of US debt securities in the form of US Treasury bonds with a $180 billion investment. Russia has been selling these bonds and as of August owned just $14 billion, dropping to the 54th largest holder of US Treasuries.

big spender Trump US Treasury

A Russian broker at Otkritie bank, Timur Nigmatullin said:

“A further sale of US Treasury bonds by Russia will most likely be compensated by buying gold and opening short-term deposits at banks.”

Indeed, the percentage of gold in Russia’s foreign reserves has grown to 18%.

China, Japan, India, and Turkey have also been selling their US bonds, due in part to interest rate hikes. China and Japan are currently the largest investors in US debt.

China’s official gold reserves have grown from 1,054 tonnes in 2015 to 1,843 tonnes by the second quarter of 2018.

Matthew Mark, director of US Asset Owners at The World Gold Council confirmed:

“China is now one of the top 10 largest central banks holding gold. It has shown to be a very resilient purchaser of gold.”

The demand for gold amongst Chinese consumers has also risen 5% from last year, notable as the Chinese stock market hits lows. Mark said:

“China is one of the most exciting markets for gold because of the strengthening of its gold market infrastructure.”

Hungary Increases Gold Reserves by 1,000%

Citing economic “safety concerns,” Hungary has suddenly increased its gold reserves by 1,000%, buying gold bullion for the first time since 1986. Hungary is also following the trend of other European central banks including Poland, Austria, Netherlands, and Germany by repatriating gold reserves back to its own country, instead of placing it with the Bank of England or the U.S Federal Reserve.

Many central banks began buying more gold in 2010, last year activity in the sector grew by 36%. Though many countries keep high balances of US Bonds and the dollar to facilitate trade, conducted mostly in USD, the trend for buying gold looks set to continue.

Commerzbank analysts predicted on Friday:

“Today’s attempt by gold to lastingly exceed the 100-day moving average looks promising. If it succeeds, technical follow-up buying should push the gold price further up.”

Images from Shutterstock.

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