The Week In Hindsight, 21 December 2013
Chinese stocks closed out their ninth consecutive day of decline this week, marking the longest run of back to back losses for 19 years. The slide in China’s stock market was driven by a sharp rise in both SHIBOR and overnight repo-rates for Chinese institutions as the PBOC refrained from injecting further funds into the financial system to ease the current liquidity crunch.
Restraint by the Peoples Bank of China forms part of a wider strategy to reform the financial system and financial institutions. Despite the recent sell off, Chinese equities are widely forecast to outperform other global indices throughout 2014. With a stable growth outlook and an improving global economy, many analysts expect Asian indices to reverse their losses of recent years. A Bloomberg survey of economists sees the Shanghai Composite Index rising by an average of 17% throughout 2014.