China Could Spur Global Financial Panic or Speculative Mania
• The connection between global investor sentiment and central bank support is not difficult to make
• Yet, skepticism is growing despite the ECB and BoJ opening the taps as the Fed plans its exit
• China's PBoC may offer another flush of optimism...but the country's manic rally could also trigger panic
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China's influence over the global financial system is significant. Not only is it the world's second largest economy, but its managed economic expansion played a critical role in positioning the global recovery from the Great Financial Crisis. Recently, China's sway over the system has taken a back seat to targeted media coverage for the Euro-area sovereign troubles, disparate US monetary policy and nagging skepticism in global capital markets. Yet, looking to these more popular catalysts for the market's most capable fundamental themes (risk trends and monetary policy), the untapped potential is materially lower than what China may pose. Whether the manic rally in Chinese shares finally tips global fears of 'bubbles' or the PBoC offers the next leg of policy-supported market appreciation, there is arguably more scope for China than most other major drivers. We look into this country's capabilities for stimulating sentiment and growth trends in today's Strategy Video.
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