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Question of the Week - 26th Jan 2016

What effect have currency devaluations and stock sell offs in China had on market conditions?

 

Chart 1:  Median Daily Share Volume, Spread and Intraday Tick Volatility of Chinese Stocks 

 

Chart 2:  Developed Asia and Emerging Asia ex China Median Daily Spread and Intraday Volatility  

  • Spread and volatility play key roles in transaction costs; it’s important to note how these market condition measures have changed as a result of currency devaluations and stock sell offs in China and how costs could be affected. We highlight trends through Q4 as we begin to review quarter end performance – Q1 is positioned to be another very high volatility period which we’ll focus on when significant market data statistics are available.
  • Spreads for Chinese stocks jumped dramatically around the time of the sell off, from around 10 bps to over 20 bps. Spreads remained high for the remainder of Q3, oscillating around 15 bps before returning to around normal in Q4.
  • Intraday volatility spiked around the sell off as well and has returned to around the same level as the beginning of Q2 with the exception of a few significant spikes in Q4.
  • Market conditions in emerging Asia experienced slightly more pronounced effects from the sell off and Yuan devaluations than developed markets did. Emerging Asia spread and volatility nearly doubled for periods of time following the currency devaulation while developed markets saw only short-lived spikes in spread and volatility before rebounding quickly.

 

Daily share volume, time weighted average spread and intraday tick volatility were calculated on a stock by stock basis. Median values are shown on all charts. Stocks priced under $1 USD were removed from the analysis.

Emerging Asia ex China includes: IDN,KAZ,KOR,LKA,MYS,PAK,PHL,THA,TWN,VNM. Developed Asia ex Japan includes: AUS,HKG,NZL,SGP.

 

Refer to Equity Related Analytics for information on available Intra-day 5 minutes statistics.

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