Date
24 January 2017
JPMorgan's Zhu Haibin says capital outflows have risen amid expectations of further rate cuts in China and rate hikes in the US. Photo: HKEJ
JPMorgan's Zhu Haibin says capital outflows have risen amid expectations of further rate cuts in China and rate hikes in the US. Photo: HKEJ

Market rout weighs heavily on firms reliant on equity financing

Chinese enterprises that rely heavily on equity financing to fund operations have been affected most by the recent stock market sell-off, Zhu Haibin, chief China economist at JPMorgan Chase, told the Hong Kong Economic Journal.

Zhu also said the market slump has undermined the government’s will to support the real economy with stock market funds.

Beijing had hoped that a robust stock market would help alleviate the difficulties of companies in securing loans from banks.

Zhu said liquidity has been flowing out of China amid expectations of further interest rate cuts in the country and rate hikes in the United States.

Some US$340 billion has flown out of China from the third quarter of last year to the second quarter of this year, he said, adding that he foresees more capital outflows in the next two to three years.

Overseas investments by mainland enterprises are also contributing to the liquidity outflow, Zhu said.

The People’s Bank of China will see its dominant role in holding assets denominated in foreign currencies will eventually vanish as more enterprises seek to increase their foreign assets, he added.

[Chinese version中文版]

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