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A New Year for the markets, but China’s woes continue

A New Year for the markets, but China’s woes continue

As we all turn over a new leaf and enter 2016 with a fresh year ahead of us it rather seems that China has missed the New Year memo!

After uncertainty over Chinese markets affected worldwide stocks in 2015, the beginning of 2016 has seen a similar story. The Shanghai Composite market dived 7% on Monday 4th January, prompting the triggering of a suspension rule after just thirty minutes of trading. There was a bounceback on the same market on Wednesday 6th, with the index closing up 2.3%, but by Monday 11th January there were renewed concerns.

Further afield, in the US, the Dow Jones and S&P 500 followed the news from China in early January with 2.3% falls, whilst the FTSE 100 was down 2%. Overall, in the first week of January the FTSE 100 dropped more than 5%, though the news at the start of the second week initially only caused the market to flutter slightly: at close of trading on Monday 11th the market was down 0.69%, having veered into and out of positive territory all day.

The concerns around China and its markets appear set to continue into this year. The Chinese government and People’s Bank of China are now using interventionary methods to impact the market, with each of these interventionary measures themselves then being assessed by both China’s markets and worldwide markets in terms of their impact on the overall economy.

Media reports during the first week of January indicated that the People’s Bank had weakened the currency to boost exports. In the second week of January, further reports suggested that the bank is spending large amounts to buy up Chinese Yuan, potentially to steady the stock market. Both moves have raised questions about just what state the Chinese economy is currently operating in.

Whatever the answer, it is a sure thing that China will once again be a hot topic this year, as the world’s second largest economy by GDP continues to come to terms with the changing demands on imports, exports, construction and more.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

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