Wednesday, February 19, 2014

Financial Review: Quantitative Easing Exit Strategy Revealed in 2013 Q4

Global financial markets still performed quite good in 2013 Q4 (fourth quarter), although U.S. Federal Reserve revealed to execute its quantitative easing (QE) exit strategy and shrink its asset purchase size starting early 2014. Below please have a look on our resourceful table summary about business or financial major news in 2013 Q4 (October to December):

Oct. 1:U.S. Federal Government shut down officially, the first time in recent 17 years, as Democrat and Republic parties failed to agree on a federal budget bill.
Oct. 10:Shanghai Stock Exchange (SSE) started allowing short-selling of Chinese government bonds by institutional investors via pre-issuance trading. You may read also: Shanghai SSE Reforms.
Oct. 15:Fitch put U.S.'s top AAA sovereign-debt credit rating on RWN (rating watch negative) list owing to Congressional wrestling between U.S. Democrat and Republic parties.
Oct. 16:U.S. Federal Government shut-down eventually ended as Democrat and Republic parties agreed temporarily on a federal budget bill through January 15, 2014, and also raised U.S. government debt ceiling through February 7, 2014.
Oct. 21:China Harbin city suffered from severe 'heavy fog' air pollution, with air quality index score there hit the highest possible value. You might read related Reforms about Pollution Emission Rights.
Oct. 24:U.S. Federal Reserve proposed a new liquidity rule requiring big financial institutions to keep enough emergency assets for at least 30-day.
Nov. 7:(1) European Central Bank (ECB) cut its refinance interest rate to record lowest level of 0.25% from 0.5% on weak Eurozone economy growth outlook.
(2) Twitter, the second biggest internet IPO (Initial Public Offering) in U.S. after Facebook, rose by +73% on its first trading day on NYSE (New York Stock Exchange).
Nov. 8:Philippine badly bit by a super-strong Typhoon Yolanda.
Nov. 11:Alibaba Tmall and Taobao Marketplace, the largest B2C (Business-to-Consumer) and C2C (Consumer-to-Consumer) platforms in China, achieved a record single-day online sales volume of over RMB 35 billion during Chinese 'Double 11' shopping festival.
Nov. 15:Communist Party of China (CPC) 18th Third Plenary Session (TPS) relaxed its one-child population policy, by allowing couples to give birth two children if anyone of them is the only child. You might read also: Low Chinese Labor Costs.
Nov. 19:(1) Japan Shinzo Abe administration announced a new JPY 5 trillion stimulus package plan to minimize the impact of its upcoming national sales tax hike. You might read also: Japanese Abenomics.
(2) JPMorgan Chase promised to pay USD$13 billion to U.S. Government, the biggest amount ever paid by a single company, for avoiding lawsuit against its mortgage practices that may had caused the 2008 global financial crisis.
Nov. 25:Crude oil price dropped as investors expected sanctions on Iranian oil exports would soon be over since Iran made historical nuclear agreement with 6 key countries (U.S., China, Germany, Russia, Britain, and France), though still allowing Iranian production of uranium within 5% enrichment.
Nov. 29:Netherlands lost its top AAA sovereign-debt credit rating as downgraded by S&P (Standard & Poor's) to AA+ on weak Dutch economy growth outlook. S&P's, on the other hand, upgraded Cyprus sovereign-debt credit rating from CCC+ to B- with confidence on austerity programs of Cypriot government.
Dec. 2:China Growth Enterprise Market (GEM) dropped over 8%, the biggest single-day crash in history ever, as China Securities Regulatory Commission (CSRC) said to resume initial public offerings (IPO) next January.
Dec. 3:Society for Worldwide Interbank Financial Telecommunication (SWIFT) reported that RMB (or called Yuan) had already replaced Euro (EUR) to become the second largest trade finance currency in the world. You might read also: RMB Global Development or our Latest RMB Forex Target.
Dec. 5:South Africa first black president-elected, Nobel Peace Prize Winner and anti-apartheid hero Nelson Mandela passed away.
Dec. 8:China trade surplus in November hit USD$33.8 billion, the highest level in almost 5 years. See also: our Latest Chinese Trade Surplus Target.
Dec. 12:China Cinda Asset Management became the first IPO listing of Chinese bad-debt AMC (asset management company). See also: Cinda AMC IPO.
Dec. 16:(1) Ireland became the first of PIIGS countries to technically head out from European sovereign-debt crisis and emerge out from international bailout rescue plan.
(2) U.S. Federal District Court in Columbia ruled against the NSA's extensive surveillance program disclosed months ago by Edward Snowden.
Dec. 17:Yahoo Inc. corporate credit rating downgraded by S&P (Standard & Poor's) to junk status on its weakening internet business growth against major competitors (such as Google).
Dec. 18:U.S. Federal Reserve FOMC (Federal Open Market Committee) initiated its QE (quantitative easing) exit strategy upon confirmed moderate U.S. economic and job market expansions, by cutting USD$10 billion total monthly asset purchase size to USD$75 billion from USD$85 billion starting next January. You might read also: Quantitative Easing Policy Exit.
Dec. 20:EU (European Union) lost its top AAA long-term credit rating as downgraded by S&P (Standard & Poor's) to AA+ on degrading overall EU creditworthiness.
Dec. 25:Japanese benchmark Nikkei 225 Index surpassed 16000 level, the first time in recent 6 years, as Shinzo Abe government easing policies favored weak Yen (JPY) currency for promoting Japanese exports.
Dec. 30:Japanese benchmark Nikkei 225 Index ended at 16291, rose by +57% YoY, the strongest annual gain since the year 1972.

We, Mr China, just would like to remind you that our 2013 Q4 financial review summary listed above is essentially extended from our last '2013 Q3 summary' [Source: our Financial Review 2013 Q3 (Third Quarter)]. Do not forget to check our complete financial review summaries of all previous quarters here: List of Financial Review Summaries.

As a conclusion, worldwide financial markets still reacted quite calmly in 2013 Q4 (fourth quarter), even though U.S. Federal Reserve already revealed to shrink its asset purchase size starting early 2014. FOMC (Federal Open Market Committee) had also revealed its quantitative easing (QE) exit strategy that it would continue to reduce asset purchase size gradually in coming months, at a pace of cutting around USD$10 billion each month, and keep on this moderate QE policy exit strategy even after Janet Yellen becomes the next Federal Reserve chairman.

In Europe, good news was that Ireland could manage to be the first of PIIGS (Portugal, Italy, Ireland, Greece and Spain) countries to technically head out from European sovereign-debt crisis. Cyprus sovereign-debt credit rating was also upgraded by S&P (Standard & Poor's) in 2013 Q4 from CCC+ to B on improved credit confidence. However, both EU (European Union) and Netherlands had lost their top AAA sovereign-debt credit rating as S&P (Standard & Poor's) downgraded their credit rating to AA+ during the same period.


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