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China To Intervene in Stocks After $590 Billion Selloff

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China stock sell-off

China moved to support its sinking stock market as state-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week’s expiration date, according to people familiar with the matter.

Government funds purchased local stocks on Tuesday after a 7 percent tumble in the CSI 300 Index on Monday triggered a market-wide trading halt, said the people, who asked not to be identified because the buying wasn’t publicly disclosed. The China Securities Regulatory Commission asked bourses verbally to tell listed companies that the six-month sales ban on major stockholders will remain valid beyond Jan. 8, the people said.

The moves show that policy makers, who took unprecedented measures to prop up stocks during a summer rout, are stepping in once again to combat a selloff that erased $590 billion of value in the worst-ever start to a year for the Chinese market. While the intervention may ease some selling pressure, it also undermines authorities’ pledge to give markets more sway in the world’s second-largest economy.

“The market has got some help from state funds and that will support shares in the short term,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “However, in the long run, the market will need its own strength to hold up. It can’t always rely on the national team.”

China’s CSI 300 index fell 2.2 percent at 2:12 p.m. local time, after earlier rising as much as 1.4 percent. The gauge’s plunge on Monday triggered the nation’s circuit breakers on their first day in effect, dealing a blow to regulatory efforts to calm one of the world’s most volatile stock markets. Authorities are trying to prevent market turmoil from eroding confidence in an economy set to grow at its weakest annual pace since 1990.

The sales ban on major holders, introduced in July near the height of a $5 trillion crash, will stay in effect until the introduction of a new rule restricting sales, the people said. Listed companies were encouraged to issue statements saying they’re willing to halt such sales, they said.

Several firms did so this week. The controlling holder of Shenzhen-listed Zhejiang Century Huatong Group said in an exchange filing it wouldn’t sell shares on the secondary market for another year after its previous commitment expires in January. Changshu Tianyin Electromechanical Co., a maker of refrigerator-compressor parts, said its controlling holders won’t sell shares over the next nine months.

International Concern

The regulatory ban, announced on July 8, applied to investors with holdings exceeding 5 percent in a single stock, along with corporate executives and directors. The restriction drew criticism at the time from foreign investors including Templeton Emerging Markets Group and UBS Wealth Management, who saw the intervention as a step too far. Goldman Sachs Group Inc. estimated the ban kept $185 billion of shares off the market.

Chinese policy makers used purchases by government-linked funds to prop up shares as the CSI 300 plunged as much as 43 percent over the summer. State funds probably spent $236 billion on equities in the three months through August, according to Goldman Sachs. The CSRC didn’t immediately respond to a faxed request for comment.

The CSI 300, which ended last year with a 5.6 percent advance, started 2016 with losses as investors anticipated an end to the sales ban and economic data signaled a continued contraction in the nation’s manufacturing sector. Trading on Tuesday was volatile, with the index swinging between gains and losses at least eight times.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Oil Prices News: Oil Gains Following Drops in US Crude Inventories

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Oil Prices Gain Following Drops in US Crude Inventories and OPEC High Compliance Level

Global oil prices extended their 2 percent gains on Thursday after data showed U.S crude oil inventories declined last week.

The price of Brent crude oil, against which Nigerian oil is measured, gained 0.2 percent or 7 cents to $43.39 a barrel as at 12:10 pm Nigerian time. While the U.S. West Texas Intermediate (WTI) crude appreciated by 8 cent or 0.2 percent to $41.12 barrels.

Oil prices extended their three days gain after the American Petroleum Institute said the U.S crude inventories declined by 5.4 million barrels in the week ended October 9.

The report released after the market closed on Wednesday revealed that distillate stockpiles, which include diesel and heating oil, declined by 3.9 million barrels. Those stated drawdowns almost double analysts’ projections for the week.

Much of the fall is due to the effects of Hurricane Delta shuttering U.S. production in the Gulf of Mexico, and as such, will be a transitory effect,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.

“Therefore, I am not getting too excited that a turn of direction is upon markets, although both contracts are approaching important technical resistance regions.”

Also, the report that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, referred to as OPEC+ attained 102 percent compliance level with their oil production cuts agreements bolstered global oil outlook. Suggesting that demands for the commodity are likely not growing and could drag down prices in few weeks, especially when one factor in the reopening of Libya’s Sharara oil field, workers returning to operation in Norway and the Gulf of Mexico.

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Oil Prices Gain on Tuesday Despite Expected Surge in Global Oil Supplies

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Oil

Oil Prices Rise Despite Expected Surge in Global Oil Supplies

Oil prices gained on Tuesday despite Libya opening Sharara oil field for production, labour in Norway reaching an agreement with oil firms to return back to work and oil workers in the U.S returning to the Gulf of Mexico region after the Hurrican Delta.

Brent crude oil, against which Nigerian oil price is measured, gained 1.77 percent to $42.46 per barrel as at 11:15 am Nigerian time on Tuesday.

While the US West Texas Intermediate (WTI) crude oil gained 2 percent to close at $40.22 per barrel.

The improvement in prices was after oil prices plunged as much as 3 percent on Monday following a resolution reached by Libyan rebels and government to commence oil production at the nation’s largest oil field, Sharara Oil Field.

This coupled with labour agreement with oil firms in Norway was expected to boost global oil supplies and eventually weighed on prices and disrupt OPEC+ production cuts strategy.

However, prices surged after Nancy Pelosi said she would commence talks on $1.8 trillion stimulus package following President Trump’s return to the White House after he was rushed to hospital following a positive COVID-19 test.

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Joe Biden Win Could Boost Oil Prices, Says Goldman Sachs

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Oil price

Oil Prices to Surge Once Joe Biden Wins -Goldman Sachs

Goldman Sachs, one of the world’s largest investment banks, has said Joe Biden win could boost global oil prices despite weak global economic outlook and COVID-19 negative impacts on the world’s growth.

The investment bank, however, remains bullish on both oil and gas prices regardless of the election outcome in November.

The bank sees oil and gas demand rising enough in 2021 to supersede election results but explained that Biden win could bolster prices by making production more expensive and more regulated for producers in the U.S.

In a note written by the bank’s commodities team on Sunday, it said “We do not expect the upcoming U.S. elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be in fact a positive catalyst.”

“Headwinds to U.S. oil and gas production would rise further under a Joe Biden administration, even if the candidate has struck a centrist tone.”

Goldman Sachs explained that if incumbent, Trump, is re-elected with pro-oil and gas policies in place that “its impact would likely remain modest at best,” Goldman’s analysts wrote, “given the more powerful shift in investor focus to incorporate ESG metrics and the associated corporate capex re-allocation away from fossil fuels.”

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