Quotable
“And what would you do, … if you could rule the world for a day? I suppose I would have no choice but to abolish reality.”
― Robert Musil, The Man Without Qualities Vol. 1
Commentary & Analysis
Vulnerable Aussie – Chinese stocks and the Reserve Bank of Australia
The Australian dollar has fallen a long way from its high against the US dollar. And from a technical perspective may have done enough; at least it may be poised to “correct” higher in the near- to medium-term. But an examination of the fundamental factors suggests there could be more room to fall—maybe a lot more room.
Two considerations come to mind:
1. The Chinese connection. Over the last few years, when speaking at conferences and peening these missives to Currency Currents readers, I have suggested Australia has become a satellite country of China. A bit of hyperbole? Yes indeed. But used in an effort to make the point Australia’s economy is closely linked with China’s; especially in regards to China’s demand for raw materials.
China’s economy is slowing, most of us know that. But most of us likely don’t give much thought to just how far and how fast economic growth in China has fallen.
From the Financial Times 6/23/15:
20 per cent to less than 6 per cent in the first quarter, which is a much more dramatic slowdown that many people realise,” said Chen Long, China economist at Gavekal Dragonomics in Beijing.
• Revenue growth for companies listed in mainland China, which excludes volatile energy and financial stocks, closely matches the trend in nominal growth rate
From the Financial Times 6/23/15:
- “A lot of the arguments over whether China’s official growth rate of 7 per cent is real or not actually miss the point that the nominal GDP growth rate has fallen from more than 20 per cent to less than 6 per cent in the first quarter, which is a much more dramatic slowdown that many people realise,” said Chen Long, China economist at Gavekal Dragonomics in Beijing.
- Revenue growth for companies listed in mainland China, which excludes volatile energy and financial stocks, closely matches the trend in nominal growth rates over the last decade.
