Three Thoughts from London

Tower Bridge morning traffic

Ilan Solot provides three key thoughts from London: the contrasting reaction to parliamentary approval of the Greek bailout, the disappointing results of Mexico’s first oil field auction, and analysing data from the Chinese stock market.

1) The contrasting reaction to the parliamentary approval of the bailout in Greece is truly remarkable: riots in Athens and Greek-linked funds surging in New York. The US domiciled ETF Greece 20 tracker (GREK US) closed 10% higher after the Greek parliament agreed to the bailout terms. It passed with 229 out of 300 votes, with 38 of those voting against the bill from the Syriza coalition. Meanwhile, an estimated 13,000 people were protesting in central Athens. Clashes turned violent with the anti-riot police using teargas against protestors throwing molotov cocktails. In comments to lawmakers, Tsipras said, “I was blackmailed […]. The government does not believe in these measures. We will do our best to protect people from measures we do not believe in but are forced to implement.”

2) Mexico’s first historic oil field auction turned out to be a disappointment. Only 2 of the 14 shallow-water fields received qualifying bids. The government had targeted $17 bln for this first round, but only got $2.6 bln. The president of Mexico’s oil regulator agency, Zepeda, tried to put a positive spin on the results by calling them a “solid start.” It doesn’t look that way. Some believe that the main reason was that the government’s minimum investment requirements were too high given the pressure on oil prices. There are four more auctions, so the government still has plenty of opportunities to adjust. The Mexican bolsa shrugged off the news closing flat on the day, but the peso underperformed.

3) There are so many interesting statistics coming out about China’s stock markets that it’s hard to know what to highlight, so here are three. First, the number of active trading accounts is estimated at about 7% of China’s urban population. Second, according to Bloomberg data, insiders have been on a shopping spree over the last few sessions. The numbers show that around half of the buy transactions by major shareholders and management in China over the last six months happened in the past week (last 6 months buys = $5.3bln; last week buys = $2.7bln). The biggest one by far was Industrial Bank Co. (601166 CH). Coercion? Insider information? Who knows. Third, other data from China Securities Finance Corp shows just how fast margin lending is falling. According to the CSF, outstanding margin loans declined some 30%, from a peak of RMB 2.3 trln ($365 bln) in mid-June to RMB 1.6 tln ($261 bln) at the start of last week.