Rising by the most in six months, stocks in China’s benchmark index rebounded from yesterday’s massive losses. Supported throughout the session, the benchmark index bounced back by 4.9 percent, placing the CSI 300 benchmark at a close of 3,710.28. Today’s overnight advance was the most in six months and continues the back and forth volatility that has become a staple in the market since earlier this year. Incidentally, the overall market is lower by 13 percent since the peak set back on June 19th, helping officials to back off on previously aggressive rhetoric on overheated market speculation. The notion helped to take the Chinese yuan slightly lower for a second day against the US dollar, trading at 7.6030 in New York.



China Markets Set For Top IPO Ranking
Set to rise to the top ranking in global IPOs, Chinese markets are reflective of the rising demand for assets, or financial interest, in the country. Already slightly past the mid year mark, capital raised in the world’s fastest growing economy has exceeded previous forecasts rising to $52 billion or almost twice the expected amount. The recent release compared with issuance in major business centers around the world with issuances last year of $41 billion (Hong Kong) and $29 billion (New York). Attributed to the big push seems to be domestic companies attempting to profit from the recent run up in stock valuations as investment interest mounts exponentially. For the year, benchmark indexes moved higher by approximately 70 percent, following a surge of 130 percent in 2006. As a result, with more deals ready to come to market, demand for the underlying currency will almost certainly be increased. Subsequently, the situation could be a compromising one for the government as officials continue to restrain the near term appreciation of the underlying yuan.

Rice Comments On China
In an interview with CNBC on Friday, US Secretary of State Condoleezza Rice stated that China “doesn’t play fair” when it comes to trade and currency matters. In line with a string of sanctions, comments and US legislation in recent years, Rice comments also criticized China for its negligence of World Trade Organization rules. “China now has to absolutely live up to those rules.” Rice further stated that “On balance, a growing, strong Chinese economy is going to be a good thing for the international system. But it has to be a growing, strong Chinese economy that plays within the rules.” Reflective of the growing resentment and frustration on the Hill, the interview may be the last of short list of visible plays as US representatives may be shifting to an even harsher concern should trade and currency matters find no flexibility in the very near term.

Asian Markets Surge Higher
Following on the heels of the Shanghai rebound, Hong Kong stocks advanced on the day, in tandem with shares in Singapore. The Hang Seng index advanced for a fourth session as banking sector shares reaped benefits of market speculation. Investors looking for policy flexibility concerning overseas investment are banking on a positive lift as foreign companies are granted access to local markets. Notably, China Construction Bank Corp led advancers, helped by Hutchinson Whampoa Ltd. and Cheng Kong Ltd. Incidentally, the latter two were boosted by upgrades in share price estimates in the near term. As a result, the index was able to gain 278.75 points or 1.3 percent, to close higher at 22,531.74 in the overnight. Singapore stocks were additionally able to gain, following an upgrade to DBS Group Holdings Ltd. by UBS AG. Noting loan growth amid a property bull market, the investment bank raised forecasts for DBS Group and two other banks helping to support the sector as a whole. The sentiment contributed to a gain of 10.28 points on the Straits Times Index, supportive of a close at 3,561.96.

Richard Lee is a Currency Strategist at FXCM.