While focus was in the Eurozone yesterday, positive news about China's banking sector helped thrill investors further. Central Huijin Investment's purchase of 4 Chinese banks was just in time to restore market confidence on the country's financial markets. We expect Asian equity markets will be boosted by the announcement in the near-term. This in turns will benefit other 'risky' assets, e.g. oil and base metals. In the commodity sector, oil gave back some of the gains made over the past few trading days as Slovakia failed to approve the new EFSF plan. The next critical event concerning Eurozone's debt crisis will be the EU summit on October 23. The market will probably turn its focus on other issues during the period.
Central Huijin, the Chinese government's investment arm, announced that it bought shares of 4 big banks (the Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank) yesterday and will continue 'related market operations' when necessary. The increase in holding this time was small when compared with existing stake. However, the move by the largest shareholder aimed to stimulate the banking sector and to alleviate concerns about China's economy, non-performing loans, and the stability of financial system. Asian stock markets were obviously boosted by the announcement with the MSCI Asia Pacific Index soaring more than +2%.
While the market largely ignored the reschedule of the EU summit, reports that the write-down on Greek debts may be as high as 60% might have damped sentiment. It's said that the delayed was due to ECB's opposition to Germany's suggestion of such a write-down. Meanwhile, Slovakia's 4-party coalition government failed to agree on the EFSF plan, making it the only country in the 17-nation region that has failed to approve the beefed-up plan to rescue debt-ridden countries.
Concerning the dataflow, UK IP data came in better than expected. Industrial production climbed +0.2% m/m in August, following a downwardly revised -0.4% in the prior month. On annual basis, the reading contracted -1.0% (consensus: -1.2%) after a slide of -0.9% a month ago. Manufacturing index dipped -0.3% m/m in August. On annual basis, the reading gained +1.5% following an upwardly revised +2.6% in July.