Home' Trinidad and Tobago Guardian : June 28th 2015 Contents Stocks had a mixed day Friday, as
investors waited for negotiators
to finish their work on a solution
to Greece s debt problems. Chi-
nese stocks plunged seven per
cent as fears spread that a yearlong bull rally
there has become overheated. China s bench-
mark index is still up more than double over
the past year.
The Dow Jones industrial average added
56.32 points, or 0.3 per cent, to 17,946.68. It
was largely lifted by Nike, which rose more
than four per cent after posting strong quarterly
The Standard & Poor s 500 index fell 0.82
of a point, or 0.04 per cent, to 2,101.49 and
the Nasdaq composite lost 31.68 points, or
0.6 per cent, to 5,080.51. All three indexes
ended the week slightly lower.
As they have done all week, global investors
are watching closely as Greek debt talks go
down to the wire. On Thursday, a key meeting
of eurozone finance ministers broke up without
an agreement. The 19 ministers are due to
meet again Saturday.
Greece needs a deal in order to make a debt
payment of 1.6 billion euros (US$1.8 billion)
to the International Monetary Fund on Tuesday.
Failing to do so would put the country on a
path toward default and a possible exit from
"While these deadlines can quite often be
taken with a pinch of salt, Greece has literally
run out of time on this occasion," said Craig
Erlam, senior market analyst at OANDA.
Investors now turn to next week, when the
US government will release the June jobs report.
Economists forecast that US employers created
237,500 jobs last month, according to Fact-
There s been a lot of focus on when the
Federal Reserve will raise its key interest rate.
Recent economic data seems to show that the
US economic recovery is holding steady, and
now many investors are expecting the Fed to
raise rates in September.
"There s a premium on economic data right
now. Outside of Greece, everyone will be
focused on how the US economy is holding
up," said Quincy Krosby, a market strategist
at Prudential Financial.
While Greece has been the main driver in
financial markets recent weeks, worries over
China have risen the list of concerns. On Friday,
Chinese stocks plunged more than 7 per cent.
The Shanghai composite closed at 4,391.91.
It reached 5,300 just two weeks ago.
"Although I continue to be optimistic about
the longer-term trend of (China s) markets,
it s clear that we are in a sharp correction
phase," said Bernard Aw of IG Markets in Sin-
In energy trading, the price of oil was nearly
flat Friday. It finished the week little changed,
and remained in a narrow range for the ninth
straight week. Benchmark US crude fell seven
cents to close at US$59.63 a barrel in New
York. Oil finished the previous week at
US$59.61 and it has traded roughly between
US$57 and US$61 since late April. Brent crude,
a benchmark for international oils used by
many US refineries, rose 6 cents to close at
US$63.26 a barrel in London.
In other futures trading on the New York
Mercantile Exchange, wholesale gasoline rose
1.2 cents to close at US$2.049 a gallon. Heating
oil rose 0.1 cents to close at US$1.863 a gallon
and natural gas fell 7.7 cents to close at
US$2.773 per 1,000 cubic feet.
Gold rose US$1.40 to US$1,173.20 an ounce.
Silver fell 7 cents to US$15.73 an ounce and
copper rose 2 cents to US$2.64 a pound.
U.S. government bond prices fell. The yield
on the 10-year Treasury note rose to 2.48 per
cent from 2.39 per cent late Thursday.
In currency trading, the euro fell to US$1.1161
while the dollar rose to 123.85 Japanese yen.
How the Dow Jones industrial
average fared on Friday
Stocks had a mixed day Friday as investors
waited for negotiators to finish their work on
a solution to Greece s debt problems. The Dow
Jones industrial average got a big boost from
Nike, which rose more than 4 percent after
posting strong quarterly results.
For the day:
The Dow Jones industrial average rose 56.32
points, or 0.3 per cent, to 17,946.68.
The Standard & Poor s 500 index fell 0.82
of a point, or 0.04 per cent, to 2,101.49.
The Nasdaq lost 31.68 points, or 0.6 per
cent, to 5,080.51.
For the week:
The Dow fell 69.27 points, or 0.4 per cent.
The S&P 500 was down 8.50 points, or 0.4
The Nasdaq was down 36.49 points, or 0.7
For the year:
The Dow is up 123.61 points, or 0.7 per cent.
The S&P 500 index is up 42.59 points, or
2.1 per cent.
The Nasdaq is up 344.45 points, or 7.3 per
JUNE 28 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG9
US stocks lower on Greek concerns
After a sizzling rally that
more than doubled the
value of China s main
stock market over the past year,
investors are now heading for the
China s Shanghai Composite
plunged more than seven per cent
Friday, one of its biggest drops in
the last ten years. The index is down
19 per cent since its recent high
reached June 12.
Chinese investors may be scram-
bling, but investors in the US,
Europe and elsewhere shouldn t be
overly worried. Here s what has
happened and why investors
shouldn t react rashly:
How did the bubble begin?
There have been signs of over-
heating in China for a while. Shares
in Shanghai more than doubled over
the past year, despite evidence the
Chinese economy is slowing. Chi-
nese economic growth fell to seven
per cent from January through
March, the slowest quarter since
2009. At the same time, state-
owned media has encouraged ordi-
nary Chinese for months to load up
on shares. Many borrowed heavily
to buy stocks, taking out so-called
Rising stocks encouraged com-
panies to raise money by issuing
shares and to use the proceeds to
pay down debt. In the first half of
the year, the Shanghai stock market
led the world in initial public offer-
ings: 78 companies issued shares in
Shanghai, raising US$16.6 billion,
according to a study by the account-
ing firm EY. Hong Kong was No 2
with 31 deals that raised US$16 bil-
lion. Shenzhen was No 5 with 112
deals that raised US$7 billion.
Now analysts say the flood of
new shares is overwhelming the
market and helping to push prices
down. Moreover, the government
began to worry the market had
reached dangerous levels, and Chi-
nese regulators have started to tight-
en rules on margin lending.
Isn't China the second-largest
economy on earth? should i be
China s economy is huge, but the
country s stock market is largely
isolated. Outside investors have only
been able to access the Chinese
stock market since October, and
that required purchasing stock in
Hong Kong. To buy directly in the
Chinese stock market required a
The lack of access has made it
difficult for investors, including US
fund managers, to get exposure to
the Chinese stock market.
For example MSCI, a company
which publishes stock indexes, made
a decision earlier this month not to
include Chinese "A" shares, or stocks
traded on the mainland, in its global
indexes. MSCI largely cited the lack
of access for foreign investors to
China s market as the reason to con-
tinue to keep China out of its index-
There are funds that have expo-
sure to Chinese stocks, and they
have not fared well.
US-based exchange-traded funds,
the iShares FTSE/Xinhua China 25
index and the iShares MSCI China
Index Fund, lost two per cent. A
fund that owns A-shares, which
used to be restricted to the domestic
market, fared worse: The Deutsche
X-Trackers Harvest CSI 300 China
A-Shares plunged eight per cent.
How much money has been
Even though US investors have
limited exposure to China s market,
there is still money there. Institu-
tional investors have pulled US$22
billion out of Chinese stock funds
this year, with US$7 billion of that
withdrawn just this month, accord-
ing to EPFR Global.
"Institutional investors have been
taking money off the table most of
this year and part of last year," said
Cameron Brandt, director of
research at EPFR Global, which
tracks fund flows around the world.
"My sense is that they ve been
expecting something ugly from this
retail frenzy that has been driving
Is there a point where i should
The Chinese stock market is
down 19 per cent since hitting a
peak two weeks ago. If it goes below
20 per cent, it would be entering
what s known as a bear market.
Going into a bear market is not nec-
essarily a sign of worry, but it could
be a sign that more swings are likely
to come before things get better.
The biggest concern is whether
the drop in China s stock market
will cause the country s economy
to slow. Many US and European
companies do business in China,
and a weaker Chinese economy
could result in lower sales and profits
Chinese stocks drop, but impact in US is seen as limited
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