|
 Fed Chair Janet Yellen's comments that U.S. rates were kept on hold
on Thursday partly over concerns that China's slowdown may be more
abrupt than expected prompted some investors to fret that the Fed
was becoming too reactive, and focusing on China would prolong
current market uncertainty.
The thought of having to monitor China's notoriously opaque
policy-making process to get a better reading of Fed policy and
global liquidity has left investors flustered and dismayed.
"It's not clear what to watch," said Richard Jerram, chief Asian
economist at Bank of Singapore. "Say, if the next China PMI is not
that bad, is that reason for the Fed to go in December?" he asked,
referring to the widely followed purchasing managers' index
indicator of global demand.
"I don't know what the basis for their (Fed's) decision is anymore
because they seem to have abandoned rigor. They seem to have become
much more subjective, much more reactive, when policy is meant to be
forward-looking," Jerram added.
While others said the Fed was merely buying time, waiting for
improvement in domestic prices even while the U.S. labor market
strengthens, analysts at Citi said the September meeting was a
"bunker buster", and the Fed's new reaction function to global
market developments will take time to comprehend.
Most frustration lies in the way policy is decided and communicated
in China, the world's second largest economy - from the secretive,
centralized policy-making process and doubts over how far to trust
official data to the ruling Communist Party's heavy-handed market
intervention. The People's Bank of China (PBOC) doesn't even say
when and how often it reviews rates.
"People are concerned because in developed economies, generally,
government intervention is very scary," said Zhou Hao, economist at
Commerzbank in Singapore. "This is a kind of different mindset
between different regulators in different countries. From a
Westerner's viewpoint it's very risky."
Zhu Haibin, China economist at JPMorgan in Hong Kong, also
highlighted investors' concerns over Beijing's ability to judge
market response to its policies, as was seen during this year's
stock market collapse.
Chinese stocks <.SSEC> have fallen 39 percent since mid-June. A
scattergun regulatory response has involved a series of rate cuts, a
surprise yuan currency devaluation and back-tracking of measures on
trading and stock issuance.
[to top of second column] |
"Beijing is not doing a good job in policy communication. It is not
transparent... So, from that perspective, policy regulators are
still in a learning process," Zhu said.
PROLONGED UNCERTAINTY
Citi economists are pushing out the timing of a Fed rate rise, its
first in almost a decade, to 2016, saying it will take time for
uncertainties around China and the related slowdown in emerging
markets to clear.
"The Chinese authorities have no track record of successfully
dealing with such a structural slowdown, nor a track record of not
exacerbating such a well anticipated economic weakness," Citi said.
That risks prolonging the uncertainty and market volatility.
"This means China and its regulators are now in the driver's seat
and that isn't a thought that brings down uncertainty, quite the
contrary," said Olivier d'Assier, Asia-Pacific managing director at
risk management firm Axioma in Singapore.
"The PBOC is one of the least transparent regulators, and it appears
now that it's the one that's going to influence a lot of the
others."
"Fed-watching is a science and people have been doing it for
decades. It's not the same in China. You can watch the PBOC, but you
won't get any signal until they do something, and it might be
something totally different," he said.
(Reporting by Vidya Ranganathan, with additional reporting by the
Shanghai newsroom and Nichola Saminather in SINGAPORE; Editing by
Ian Geoghegan)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
