China enters bear market
China stocks have entered a bear market despite effort from authorities to support the economy.
Defined as a drop of 20%, the bear market in Chinese stocks came even after the central bank slashed interest rates in an effort to slow the decline seen last week.
At their lowest point the, the leading 300 stocks listed in Shanghai and Shenzhen were down as much as 7% in Monday’s session.
Much of the declines can be attributed to the Greek crisis but investors will be unnerved as the plunge came after Chinese central bank easing, a typically bullish move for equities.
The People’s Bank of China cuts interest rates by 0.25% to 4.85% on Saturda.
Chinese stock markets have rallied sharply over the past few months as a record number of trading accounts were opened by Chinese individuals and margin trading levels soared, stoking fears of a bubble.
The recent drop in shares has some investors believing Chinese shares are likely to see further downside in the coming months.
“With this sort of slump, are we still in a bull market? Of course not,” said Lu Yahu, a Chinese stock trader to a Reuters reporter.
Regulators will be concerned with the recent declines as they are running out of available tools to boost the economy and whilst preventing a bubble and eventual crash in asset prices.
“This could prove to be a difficult balancing act; and, ultimately, to shore up investors’ confidence, earnings growth needs to come through and the hefty valuations for small-cap growth stocks have to come down,” HSBC analysts wrote in a note.
Rio Tinto announces Mongolian investment after withdrawing from Zimbabwe
After announcing plans to sell its stakes in mines in Zimbabwe, Rio Tinto confirmed that it has pledged to invest at least $250 million into the Oyu Tolgoi mine in Mongolia.
On Friday, the world’s second-largest mining company announced that it would be stopping operations in Zimbabwe and selling its 78 percent stake in the Murowa diamond mine to its former local unit, RioZim Ltd. The mine was valued at $279 million by Deutsche Bank AG in 2013.
In a statement by the Mongolian Prime Minister, it emerged that Rio Tinto has pledged to invest in the construction of the underground section of the massive Oyu Tolgoi copper and gold mine in Mongolia this year.
The development of the mine has long been stalled, but this announcement marks progress for the project that is expected to boost Mongolia’s economy by a third when it reaches full capacity in 2021. Operated by Rio Tinto, is expected to produce an average of 430,000 tonnes of copper and 425,000 ounces of gold annually, but still needs an additional $4 billion finance to go ahead.
Armadale Capital up 36% after news of possible acquisition
Investment company Armadale Capital (LSE:ACP) was up 36.5% this morning, after news of a proposed acquisition by investee company, Mine Restoration Investment.
MRI announced that it has entered into a cooperative agreement with Armadale to acquire up to 39.2% interest in Iron Mineral Beneficiation Services Proprietary Limited. Armadale’c current investment in MRI is £0.91 million. In a statement on their website, the directors said that “the Company has been actively looking to realise its investment in MRI and the Directors believe this proposed acquisition will facilitate this process, as well as underpinning the value of its shareholding.”
Armadale Capital Plc is focused on investing in and developing a portfolio of investments, targeting the natural resources sector in Africa.
Nova Resources down 54% after final year results
Investment company Nova Resources was on of the biggest movers on the AIM market this morning, falling 54.5% after publishing its audited results for 2014.
The company reported a loss for the year of £2,922,790, compared to £477,699 in 2013. The basic loss per share was 0.82p.
Despite these large losses, the report stated that “the Company has adequate resources and loans from long term investors to continue in operational existence for the foreseeable future”.
Nova Resources are an investment company, with a policy focusing on building up businesses that are involved in the energy, infrastructure, technology and manufacturing industries, as well as the natural resources sector.
Euro pares losses
The Euro has pared its losses and filled the gap formed against the dollar on the open following the announcement of the Greek referendum.
‘It looks like a bit of stability has returned after the earlier onslaught, so I’d say there was a bit of profit-taking, given that we are very much in a state of flux’ RBC Capital said to Reuters.
The EUR/USD fell as low as 1.0954 in Asian trading but rebounded in early European trading. The upcoming Non-Farm Payrolls is likely to provide some stability in the pair as traders position themselves for a shift in rate hike expectations.
British mortgage approvals fall in May
Mortgage approvals fell in May, according to data released this morning by the Bank of England.
The drop surprised analysts, going against recent signs indicating that the housing market has picked up over the last few months.
Mortgage approvals for house purchases numbered 64,434 in May from 67,580 in April. Analysts in a Reuters poll had forecast 68,700 mortgage approvals were made in May.
According to the B of E figures, growth of consumer lending has also slowed; however lending to non-financial businesses rose by 713 million pounds, recovering around half of April’s 1.473 billion pound dip.
Global stock markets slide as hopes of Greek deal fade
Stock markets throughout Europe and Asia have suffered in the wake of an announcement by Greece on Sunday that banks will remain closed for the next six days.
The FTSE 100 fell 2% in early trading this morning, with travel and leisure stocks leading the fall; events in Greece, as well as holiday companies evacuating tourists from Tunisia after Friday’s terrorist attacks, have both had an impact.
Japan’s Nikkei index, Germany’s Dax index and France’s Cac 40 all fell nearly 3% this morning, and the Athens Stock Exchange is closed all week.
Greek banks to close all week
The Greek government has an announced that banks will stay shut all week, after a decision by the ECB not to extend emergency funding.
In a televised address on Sunday night, Prime Minister Alexis Tsipras said there was an “extremely urgent” need to protect the financial system and guard against the banks collapsing through mass withdrawals. It was confirmed that there will be a withdrawal limit of 60 euros a day in place throughout this period.
Greece has 48 hours to pay back 1.6 billion euros to the IMF; however, hopes of reaching a deal with international lenders before this time are sinking fast. Tsipras has announced a snap referendum next Sunday on the terms of a cash-for-reforms deal, angering creditors and prolonging the negotiation process.
“I can’t believe it,” Athens resident Evgenia Gekou, 50, told the BBC. “I keep thinking we will wake up tomorrow and everything will be OK. I’m trying hard not to worry.”
China’s Premier says economy is on the up
China’s premier, Li Keqiang, told state-owned China Central Television today that the economy’s fundamentals were good and major indicators were improving, despite the Shanghai Composite falling 7% this morning.
“Currently China’s economic fundamentals are good. Main economic indicators such as industrial output, investment, consumption, exports and imports have stabilised and showed improvements since May,” Li was quoted as saying.
“Employment is stabilizing and increasing. The economic performance is within a reasonable range.”
The government will strengthen targeted policy adjustments, Li said, adding that China was able to maintain a mid to high growth rate.
The central bank has recently cut interest rates to lower borrowing costs and encourage more lending, and most analysts expect the central bank to loosen policy further still. Li continued that the government would strengthen targeted policy adjustments, adding that China was able to maintain a mid to high growth rate.
London’s Silicon Roundabout leads Europe’s tech scene
Almost five years since David Cameron and Boris Johnson launched the ‘Tech City’ initiative, London’s tech scene has grown to become the most important tech hub in Europe.
London’s Silicon Roundabout is hot on the heels of Silicon Valley, with almost half of Europe’s billion dollar tech companies founded in the UK. These so called ‘unicorn’ companies, aptly named for their near mythical status, are born when start-up companies receive enough venture capital investment to be valued at a billion dollars.
The UK has produced 17 unicorns since 2000, with a total valuation of more than $40bn – FinTech’s crowdfunding website Funding Circle and online clothing retailer ASOS are just two of those. Other unicorns include JustEat, Skrill, Wonga, Zoopla, Farfetch, Transferwise, Shazam and Rightmove.
Manish Madhvani, Co-Founder and Managing Partner of GP Bullhound, comments: “The UK has raced ahead as the undisputed home of unicorns in Europe, with London producing the vast majority of Britain’s billion dollar tech companies. Growth is accelerating because we have created an environment capable of sustaining high levels of investment across a range of tech sectors.”
Cameron’s tech city initiative, launched in 2010, aimed to “bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park to help make east London one of the world’s great technology centres”. He went further, saying that the idea was to “help to create the right framework, so it’s easier for new companies to start up, for venture capital firms to invest, for innovations to flourish, for businesses to grow.”
This project appears to have worked; London’s digital technology sector is growing faster than both the London and wider UK economy, and will continue to do so for the next decade according to research from London & Partners, the Mayor’s promotional company for London.
These achievements were celebrated at London’s Technology Week, which ran from the 15th – 21st June. More than 210 events took place, with workshops and talk hosted by Bloomberg, Goldman Sachs and Accenture, to name just a few.