|
China's recent stock market meltdown might lead to - or be the result of - underlying economic weakness that would have serious consequences for exporting countries, according to one of Morgan Stanley Investment Management's senior portfolio managers.
Andrew Harmstone, who oversees about $5.4 billion through funds under the firm’s global balanced risk strategy, says if the impact to wealth from the recent trillion dollar equity sell-off ended up changing Beijing's plans to turn China from an export-driven to a consumption-focused economy, there could be "significant implications for the rest of the world."
The same was true if the intense market correction was triggered by investor concerns about the health of the Chinese economy, which was also possible.
"If indeed the Chinese economy is slowing, and if consumption drops because of the wealth effect, this could have implications for developed markets," Harmstone said. "It clearly has implications for
|
developing markets that are exporting to China and also to developed markets like Canada and Australia."
Despite a coordinated effort by the central bank and government to ease monetary policy, control equity sales and limit new stock issues, the Shanghai market lost nearly 25 percent of its value in one month.
It has settled in recent days, but the event left professional investors around the world shaken.
"Usually when the government signals and then takes action like that it actually has a reaction," Harmstone said. "However, this time it didn't. This was the first time that I'd felt that the government was not going to be able to control things."
For more of the Sydney Morning Herald story: www.smh.com.au
|
