world growth

world growth

Monday, June 26, 2017

China stock shares join MSCI index, it is a game changer

Chinese stock market will draw huge amount of capital flows from emerging markets like India, Vietnam, etc. The effect will be far reaching.

Last week, Morgan Stanley Capital International (MSCI), a widely-tracked global index provider, said it would add China's local currency shares, referred to as China A shares, to its benchmark emerging markets index, after few years of having rejected overtures on the same.

What is MSCI?

It is the world's biggest index compiler, with more than $10 trillion in assets benchmarked to its financial products, with emerging markets alone accounting for $2 trillion.

Why is MSCI index important?

The indices are closely monitored by global investors. Inclusion in MSCI Inc.'s stock indices opens up investment interest from foreign investors in a particular country and brings a stamp of financial credibility.

What is PRC China and why haven't its shares been featured in the MSCI index so far?

It is an area under the direct jurisdiction of China and excludes special administrative regions of Hong Kong and Macau. Chinese mainland markets were not open to foreign investors (protectionism ?).

So, foreign investors hitherto had access to non-mainland shares — those that are traded in the markets of Hong Kong and Macau. These shares have been part of the MSCI Emerging Markets Index. China has been working to ease restrictions on foreign investors, influencing MSCI decision now.

What happens now?

MSCI will add 222 China A shares (blue chips) starting 2018. The stocks, which would represent a weightage of only 0.73% in the benchmark, will be included via a two-phase process in May and August next year.

Saturday, June 17, 2017

China deal set to boost US dairy exports, result of Xi-Trump summit

More beef and milk products are coming to China from US.


China is already the world's largest dairy importer, with 1.4 billion population (world's largest, India is 2nd with 1.3 billion) and growing.
The agreement will benefit more than 200 US dairy exporters while paving the way for new opportunities in China, the US Dairy Export Council said
China and the US signed a memorandum of understanding on Thursday that will increase American dairy exports to China, a major US dairy industry association said, in a deal that shows new progress in the two sides’ ongoing negotiations towards a larger upcoming trade agreement.
The memorandum will benefit thousands of US dairy exporters in the short term and pave the way for additional US entrants in the future, according to a statement released by the US Dairy Export Council, an industry group representing more than 120 American dairy companies.
The statement added that this action creates new, good opportunities for dairy farmers (in Midwest states such as Wisconsin) and processors and the milk, cheese, infant formula and ingredients they produce.
"This deal marks a significant opportunity for the US dairy industry," said Tom Vilsack, president and CEO of USDEC.
Deal on US beef exports to China could be in place by early June, says US Agriculture Department. The US and China have been engaging in direct trade talks in what they have called a 100-day plan to reduce a bilateral trade deficit and expand market access in each other's economies since US President Donald Trump met his Chinese counterpart President Xi Jinping in early April at Mar-a-Largo.Under initial results announced on May 12, US beef, natural gas and certain financial services will be allowed into China by July 16 when the two nations are expected to finalise a deal during high-level talks in Washington. The discussions will be co-chaired from the US side by US Treasury Secretary Mnuchin (a Goldman Sachs banker) and Commerce Secretary Wilbur Ross.
Beijing, US reach trade deal to boost American imports to China in wake of Xi-Trump summitAfter the 100-day plan, the two sides intend to enter another "one-year cycle" of negotiations, Mnuchin said during a US-China Business Council meeting in early June, indicating there are more specific trade disputes to solve.