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July 21, 2015

The Month In Charts: Greece And China Roil Markets, A World Apart

by Vincent Flasseur.

At mid-year, Month in Charts takes stock of the economic landscape. In addition to Greece’s long drawn-out soap opera, China is now experiencing something of an equity market meltdown. As of its close on July 9, the Shanghai Shenzhen CSI 300 Index was down 28 percent from its peak, noted Reuters Breakingviews. As of July 17, it had rebounded somewhat, but was still down 22 percent from its peak. We look to Europe and to Asia.

The Greek debt crisis lurched along. In June, the country missed a debt payment to the International Monetary Fund and kept its banks closed for several days, leading to customer runs on automatic teller machines that quickly ran out of cash.

Greeks then overwhelmingly rejected conditions of a rescue package from creditors, throwing the future of the country’s euro zone membership into further doubt and deepening a standoff with lenders. The euro and stock prices in Asia fell sharply on the news.

However, subsequently the Greek parliament passed sweeping austerity measures demanded by lenders to open talks on a new multibillion-euro bailout package to keep Greece in the euro, but dozens of hardliners in the ruling Syriza party deserted Prime Minister Alexis Tsipras. He had campaigned on the concept that his party would defy European insistence on austerity.

Tsipras required the support of pro-European opposition parties to push the measure through, leaving a question over the future of his government.

In exchange for funding worth up to 86 billion euros ($94 billion), Greece accepted reforms including significant pension adjustments, increases to value added taxes, an overhaul of its collective bargaining system, measures to liberalize its economy and tight limits on public spending.

Across the world, the Shanghai index had more than doubled in value by mid-June 2015, compared to the previous June. Speculation took hold, amid volume spikes and wild price volatility.

China’s securities regulators tried to impose various measures to restore order, including forbidding selling by shareholders with large stakes in listed firms.

However, the month-long slide in share prices has called into question the country’s recent conversion to market dogma, while the state’s floundering response has exposed the limits of its grip on China’s financial system. Broader reforms may suffer, according to Reuters Breakingviews.

Let’s take a look at the corresponding charts:

chart 1
Looking at asset performance in the first half of 2015: although the Shanghai stock market has undergone volatility of late, A shares still delivered the top results. Bringing up the bottom were Greek 10-year government bonds.

 

 

chart 2
A comprehensive look at how the Greek debt crisis unfolded, using the 10-year government bond yield as a benchmark.

 

 

chart 3
Greece’s government debt outpaces the rest of its Eurozone counterparts.

 

 

chart 4
Banks have dramatically reduced their exposures to Greek debt. The non-bank private sector carries the most exposure, by a small margin, over banks.

 

 

chart 5
These charts set out the stark reality of the Greek economic picture since the 2008 financial crisis began.

 

 

chart 6
One of the factors fueling unrest in Greece is the huge unemployment rate, as half of all young people aged 15 to 24 are without jobs. Overall, one-quarter of the working population is out of work.

 

 

chart 7
This chart indicates one of the major reasons that negotiations on another bailout for Greece have been difficult.

 

 

chart 8
China’s stock market performance stands in stark contrast to other Asian equity markets.

 

 

chart 9
Compared to emerging markets’ benchmark indices, the Shanghai composite’s performance this year has been marked by wide swings.

 

 


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