Market commentary: China’s currency and Apple’s event

China has taken another step forward in its pursuit to establish the Yuan as an accepted international reserve currency, hoping to join a very small elite club which currently only has four members: the US Dollar, the Euro, the British Pound and the Japanese Yen. 

The second world’s largest economy has announced that it will open its onshore domestic foreign-exchange market to foreign banks, increasing the access of overseas banks to the Yuan, and, in so doing, facilitating the holding of the Chinese currency as a foreign reserve. This measure is just the latest step taken by the Chinese Government and the country’s Central Bank in an attempt to convince the International Monetary Fund to grant the “reserve status” of their currency.

While traders and financial institutions have welcomed, and to some extend benefited, the slow but continuous opening of China’s economy, equity market and currency trading, the process has not been painless and China still has a long way to go before becoming a completely free market country as the US and Europe. 

Although this Chinese Government has accelerated the pace of the liberalization of the country’s economy and financial industry, investors have discovered that Chinese authorities, such as the BPOC, still retain a substantial grip on the country’s currency and stock markets, and not few have been burnt by the Chinese Government intervention aimed at limiting stocks’ price swings, tradable volumes and most recently currency values.

In fact, while many have enjoyed abnormal profits investing the Chinese domestic equity markets throughout the first half of the year, many others found themselves trapped in a volatile market without the ability to liquidate their long positions due to volume restrictions put in place by the Government in June after equities plunged almost 27% over just two weeks.

Another unpleasant result connected to China’s currency liberalization was the sudden and unexpected large devaluation of the Yuan on August 11th, which caused a widespread panic selloff across global markets, costing investors billions and pushing several major equity indices to erase most of the gains recorded in 2015.

At the same time that Asia’s largest economy announced another major step toward a more open economy, in the US, the largest and most valuable company in the world hosted one of most anticipated events of the year in San Francisco, California. Apple took the spotlight on Wednesday by unveiling all the latest products the Cupertino-based tech giant will bring to consumers this autumn.

Among them, Apple presented its new iPhone 6S and 6S Plus, which will range from $200 to $500 and will feature a new 3D touch technology detecting how hard users are pressing the device’s screen, which allows users to input different commands depending on how lightly they touch the device.

Another product discussed at the event was the Apple TV, with the latest models coming with motion sensors to and voice control technology able to enhanced movie and gaming experiences.

The new Apple TV will cost between $150 and $200 and is expected to reach Apple’s stores in late October. Perhaps the most anticipated product was the iPad Pro, through which the tech giant plans to reconquer the tablet market after losing market shares to competitors such as Samsung and Microsoft.

The new iPad will target the higher segment of the consumer market as the device will cost between $800 and $1,080 and will feature a 12.9 inches screen and the same operating system that is powering the rest of Apple’s mobile devices.

Investors did not seem to be completely convinced that the latest products will be able to power above average growth for Apple, selling the stock in yesterday’s afternoon trading session and pushing Apple’s shares to close almost 2% down on the day.

Disclaimer:

This article was issued by Paolo Zonno, trader/analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.