The nine-year link between Australian and Chinese stocks is breaking down.
The CHART OF THE DAY shows the 120-day correlation between the S&P/ASX 200 Index and Hang Seng China Enterprises Index reached 0.3 last month, the lowest since December 2004, compared with an average of 0.6 over the period. A reading of 1 would indicate the two assets are in lockstep, while zero would represent no relationship.
Investors are speculating Australia's economy will withstand a slowdown in China, its biggest trading partner, as record-low interest rates boost consumer spending, hiring and house-building amid a drop in mining investment. The price of iron ore, Australia's largest export, fell 13 percent last quarter as Chinese demand for the steelmaking ingredient waned.
"We are starting to transition away from Australia's reliance on China," said Shane Oliver, who helps oversee about $130 billion as Sydney-based head of investment strategy at AMP Capital Investors Ltd. "The Reserve Bank of Australia has taken the brakes off and that's ultimately led to confidence in a rebalancing of the economy away from mining. We've disconnected from the Chinese share market."
Recommended Content
Editors’ Picks
AUD/USD risks a deeper drop in the short term
AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.
EUR/USD leaves the door open to a decline to 1.0600
A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving
Bitcoin (BTC) price is borderline strong and weak with the brunt of the weakness being felt by altcoins. Regarding strength, it continues to close above the $60,000 threshold for seven weeks in a row.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.