Second, China’s stock markets are still struggling to find a valuation floor based on local demand.
In addition, Chinese authorities have yet to effectively implement the recently announced changes to the Qualified Foreign Institutional Investor program and clarify new rules on equity trading suspension.
Spajic did note that notwithstanding all this, MSCI has not ‘slammed on the brakes’ and could revisit the decision, if developments warrant.
David Riley, head of credit strategy at BlueBay Asset Management, believes that it is in fact China that matters much more for the global economy and markets than events in the United Kingdom.
“The initial reaction of risk assets, global equity and credit, to the Brexit vote was more violent than to the CNY devaluation but within a week has been almost fully reversed,” he explained. “Emerging market assets have rallied strongly and end the week stronger than before the UK referendum vote to leave the EU. The relative out-performance of emerging market assets underscores that Brexit is essentially a local rather than global event.
“China clearly matters much more for the global economy and markets than the United Kingdom,” Riley continued. “The drama of Brexit has distracted investors from worries of a more severe slowdown in China’s growth as earlier policy easing is exhausted and the CNY’s stealth depreciation. And while we share the view that Brexit is not a global systemic risk event, it is symptomatic of the rising pressure on the economic and political status quo especially in so-called developed countries.”
