This weekend, the market is dominated by risk aversion movements. The default concerns arising from the bond payment halt of China’s real estate giant, Country Garden, have cast a shadow. Adding to this, China’s Evergrande, which experienced a crisis two years ago, has applied for Chapter 15 bankruptcy protection in New York. While the Chinese government has announced economic support measures, specific strategies seem lacking. The People’s Bank of China has been implementing various policy rate cuts, and further cuts in long-term policy rates are anticipated next week.
With the effects of effective fiscal policies yet to emerge, a stronger emphasis on monetary policy responses has led to yuan depreciation. Reports surfaced yesterday that Chinese authorities instructed state-owned banks to strengthen intervention efforts this week, displaying a firm stance to curb yuan depreciation. However, this can evoke memories of government interventions to counter yen appreciation. Whether the current measures can deter the market’s China selling remains uncertain.
Today is expected to see a tendency towards risk-off sentiment as we head into the weekend.