Regulators cracked down on margin trading, which has been blamed for fuelling a wave of speculation over the past three months. Bank stocks were hit after the banking regulator issued draft rules to tighten supervision of entrusted loans, a kind of shadow banking. Moreover, there is an expectation that the GDP for Q4 will come in at 7.2 percent.
In an interview to CNBC-TV18, Benoit Anne, Managing Director, Head of EM Strategy, Societe Generale, said the quality in China is better than quantity these days. He expects the Q4 GDP at 7.3 percent.
Discussing what really happened in the market today, he said it was driven by the moves on the part of authorities which created a bit of a shakeout. "I do not see it as more than that."
Below is the transcript of Benoit Anne's interview with CNBC-TV18's Sonia Shenoy and Senthil Chengalvarayan.
Sonia: There is an expectation that the GDP for Q4 will come in at 7.2 percent. What is your own estimate of what China will project this quarter around?
A: That sounds reasonable, we have 7.3 percent. Behind the number what I really want to flag is quality. Quality in China is better than quantity these days. The important thing to remember is, what we are observing is better quality growth even if we get less of it.
Senthil: The current commodity prices do they factor in quality or is there still room for a shock?
A: I am not too concerned about potential shock here simply because if you think about China you have to remember policy room to accommodate those shocks precisely. Monetary policy easing, fiscal spending and social reforms, we are seeing authorities doing the right thing and I guess they are working towards all those fronts. So, tactically we are concerned about slowdown in China but the big picture still looks pretty okay.
Senthil: Since the slowdown in China is one of the main reasons behind the commodities slowdown do you then think that the cycle there has at least halted – the downward cycle for the time being?
A: In terms of the China slowdown story we are probably going towards running its own course.
Senthil: Has the resultant commodity slowdown cycle halted?
A: I would say the risk on commodities coming from China is less substantial than other global risks at this stage. So, I am less concerned about the China as source of risk than the global picture.
Sonia: What really happened in the market today? Was it just because of the margin trading clamp down by the regulator or was there anything else that led to the 8 percent sell off?
A: I would say it was driven by the moves on the part of the authorities which created a bit of a shakeout. I do not see it as more than that.
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