Copying and distributing are prohibited without permission of the publisher
Equity market risks return
23 July 2013
Chinese equity markets see sharp rise in volatility
There was a pronounced uptick in equity market risk during the second quarter after five consecutive quarters of falling volatility, according to Axioma Insight's latest Quarterly Risk Review.
The firm said that despite increasing market volatility, led by the US Federal Reserve's statements over the future ending of quantitative easing, stalling Chinese growth and questions over the efficacy of Japan’s stimulus efforts, among other issues, the increase was “lower than what might have been expected”.
“The second quarter gave investors plenty to fret about,” said Melissa Brown, senior director, applied research at Axioma and co-author of the report. “The result was that most markets retreated in the period, as investors justifiably felt somewhat whipsawed, though the impact on risk largely occurred toward the end of the quarter.”
Axioma said the majority of equity market volatility was across China, Japan and Asia, possibly marking a shift in investor attention away from Europe and the Eurozone crisis. Chinese equity markets saw a sharp rise in volatility in late June, with interbank lending rates climbing as a result of government efforts to curb the country's shadow banking system.
However, the report highlighted that despite market concerns, volatility was far below the peaks seen at the height of the financial crisis.
Brown added: “Risk in most markets is still fairly low, relatively speaking. By the same token, the second-quarter upturn in risk is not to be ignored.
“We cannot help but feel a bit uneasy, and will be listening closely for the sound of sputtering economic engines on the road ahead.”