For some of us, temperance in January is a lifestyle choice after seasonal over-indulgence; but for investors in Chinese equities, the decision to abstain has been taken out of their hands. Twice this week, plummeting prices on China’s major exchanges caused a new “circuit-breaker” rule to be triggered and trading to be suspended. On the second occasion – Thursday – there was just half an hour of dealing before prohibition kicked in, making it the shortest day in the Chinese stock market’s 25-year history. Concern about the volatility spread quickly, with falling oil prices and lower US equities being thrown into the mix. In the UK, the FTSE 100 index was down 4.6% over the week to close on Thursday, having fallen below the psychologically important 6,000 mark.
While the reason for the circuit-breaker’s deployment was clear cut – Chinese equities fell by more than 7% – the underlying cause of the drop in share prices was more opaque. After the first suspension on Monday, some analysts cited poor manufacturing figures, while the second instance was widely believed to stem from fears that Chinese policymakers would allow the renminbi to weaken against the US dollar. Whatever the reason, the country’s authorities put the rule on ice, claiming that it hadn’t “achieved the expected effect”. On Friday, Chinese equities rallied as state-controlled funds moved in and started buying.
The Hangover Part II
George Osborne had some sobering thoughts on the slowing global economy and the potential implications for the UK this week. According to the Chancellor, Britain now faces a dangerous cocktail of risks. He also claimed that recent stock market volatility should put an end to creeping complacency, as it shows that the economy is vulnerable to threats from elsewhere in the world. Mr Osborne proceeded to use a speech in Cardiff to state that he believes that the task of improving the economy is more “mission critical”, than “mission accomplished”.
Fizz-ling out
There were probably few farewell toasts for Marks & Spencer’s chief Mark Bolland. After failing to improve sales of the retail stalwart’s clothing lines, Mr Bolland announced his retirement, making way for former head of M&S Food, Steve Rowe, to step into the chief executive’s chair. The company reported a 5.8% drop in sales of its general merchandise over the final quarter of 2015.
Nor were they breaking out the champagne at Sainsbury’s: the supermarket giant revealed that it had been rebuffed in a November bid to buy Home Retail Group (which owns brands such as Argos and Homebase). Home Retail Group rejected the overture on the grounds that it undervalued the company. Sainsbury’s is said to be still “considering its position” and has until early February to decide whether to make a further move. The company’s investors must be hoping that whatever the outcome, it won’t be part of a catalogue of errors.
Separately, the UK government introduced new guidance on alcohol intake this week – the first such move since 1995. According to the new recommendations, men and women should drink no more than 14 units a week. Cheers!
And finally…
One resident of the Khasanky Region in the far east of Russia has almost become the definition of dead drunk. According to the Khasanskiye Vesti newspaper, the man passed out after drinking too much vodka with friends and was declared dead by medical staff. He woke up several hours later on the floor of the local mortuary’s freezer and had to bang on the door until police arrived to let him out. The man realised there was no time to waste in procuring a stiff drink and promptly returned to the party, where his friends were mourning his loss. Rumours that a new drink has been created to honour the icy imbiber are probably unfounded: after all, a Blue Russian sounds more like a type of cat than a cocktail.
