Tags: china | yuan | fed | cnbc

China Tries to Stabilize Yuan

China Tries to Stabilize Yuan
(Dollar Photo Club)

By    |   Wednesday, 19 August 2015 08:03 AM

On the recent devaluation of the yuan by the People’s Bank of China, with Chinese stocks down 3%, Marc Ostwald, Strategist at ADM ISI, said the Chinese authorities are struggling to “rebalance” the economy in the face of slower growth and rising debt, as called for by the G-20.

But Ostwald concluded that this will be a long-term project.

Fraser Howie, an independent analyst, added that the Chinese are trying to deal with the consequences of popping a stock market bubble they created, and there is bound to be increased volatility.

He called last week’s devaluation “a shambles” and concluded the yuan remains “as fixed as it ever was.”

Alan Robinson, VP and Research Analyst at RBC Wealth Management, says, as this writer did, that the devaluation was “no big deal,” and he predicted that there would be more to go in what he considers the right direction.

He contends that QE has been working in the U.S. and Japan, and now he thinks it is working in Europe and has created “a major runway ahead” for equities there thanks to expanding profit margins.

CNBC’s Martin Soong wonders out loud whether, with the U.S. market now “range bound,” QE will turn out to have been a mere “sugar rush.”

Frank Holmes, CEO of U.S. Global Investors, told CNBC’s Bernie Lo that he thinks the devaluation still has further to go, and he tied this to what he called “the big drama in the U.S. – will they raise rates?”

He thinks that the “threat” of Fed action is leading to what he calls “competitive currency debasement,” including a currency war among emerging markets.

Lo asked, “What’s the rush?” for the Fed to act in September or December. Holmes had no answer, but he pointed to the strength in Utilities as evidence of caution among investors.

Still he insisted, “Everything’s going to be OK,” citing “shocking” profits in airlines due to lower oil.

Meanwhile, as retail stocks reported earnings, Home Depot (HD) and Wal-Mart (WMT) headed in opposite directions, going up and down, respectively, by about 3%.

Joseph Feldman, Senior Managing Director at Telsey Advisory, credited stronger housing indicators for the strength in Home Depot and blamed higher costs to drive traffic at Wal-Mart for an earnings drop of 15%.

Feldman predicted that this program of higher investment will continue into next year, and he suggested this is probably necessary to improve the experience for workers and customers.

After Feldman made the case that Home Depot is less subject to the threat of online competition than is Wal-Mart, Martin Soong asked whether Home Depot would suffer when interest rates rise.

Feldman countered that higher rates will coincide with a stronger economy and more confident investor, and he recommended grocers like Kroger (KR) and Costco (COST) as safe places to invest.

Daniel Binder, Managing Director at Jefferies and Co., called the investments by Wal-Mart, including opening two new fulfillment centers, necessary to catch up to Amazon in the online space, and he said the company has “a duty to shareholders” to make these investments.

Lindsey Bell, Senior Analyst at S&P Capital IQ, said Wal-Mart’s investment program is taking longer and costing more than expected, but it is producing results on the top line, up 1.5%, and same-store sales were better than expected.

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Robert-Feinberg
On the related issue of the recent devaluation of the yuan by the People’s Bank of China, with Chinese stocks down 3%, Marc Ostwald, Strategist at ADM ISI, said the Chinese authorities are struggling to “rebalance” the economy in the face of slower growth and rising debt, as called for by the G-20.
china, yuan, fed, cnbc
551
2015-03-19
Wednesday, 19 August 2015 08:03 AM
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