Global weekly: Happy New Year?

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ABN AMRO Private Banking, Expertise, Investments, Investments Advisory, investment strategy

Events in China took center stage, as market interventions and currency devaluation caused reverberations in financial markets around the world.

So far, 2016 has had a poor start. This week, a brutal sell-off in Chinese equity markets was initially triggered by weaker-than-expected Chinese manufacturing data and by uncertainty regarding new and expiring stock market regulations. The move was accelerated, however, by the weaker fixing of the Chinese yuan by the central bank, which sparked fears of more substantial weakness of the yuan to come.

The yuan had already grabbed attention in August, when Chinese authorities allowed it to devaluate. The currency is now managed via a basket of currencies, instead of being pegged to the US dollar. The new manner of managing the yuan better reflects China’s trading position. But removing the link to the dollar has invited speculation that a weaker yuan is a government policy to support the economy.

The recent market wobbles have not affected our view on China or global growth. We expect the Chinese economy to grow by a healthy 6.5% in 2016. The impact on developed economies is expected to be limited. The US and Europe will continue on a path of self-sustained recovery that is supported by domestic demand.

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