China surprised the markets today by speeding up the devaluation of the yuan to its lowest level in nearly five years. According to experts, devaluation is seen as the last resort to boost China’s exports. Due to this, China’s stock market sank, and triggered the recently installed circuit breaker which halts the markets for 15 minutes after a 5% decline, and shuts down the day’s trading at 7% decline. And thus, China saw its second stock market crash in a week! Today may also be the shortest trading day for China as the trading halted after just 30 minutes of opening.
This has caused the nervousness amongst the investors. According to Christopher Balding, a professor of finance and economics at Peking University’s HSBC Business School, Chinese stock market is very much over valued and in order to get a reasonable valuation, we should be looking at a significant fall. Considering the actions of the Government, (shutting down the trading at just 7% decline whereas, a comparatively stable U.S. market has a 20% threshold) it is less likely that the government would allow a significant fall which would give a reasonable valuation.
Asian markets have been affected by the Chinese market crash. The U.S. markets may follow suit.
$BABA – Alibaba – Bearish (Short- Term)
Adding to the existing woes of the stock markets around the globe, the fall of Oil Prices resulting from
- Tension between Saudi Arabia and Iran
- Global oversupply
- Concern over Chinese market (as China is one of the major importers of oil)
$NFLX – Bearish (Short – Term)
Netflix is going global by expanding into 130 new countries! During Netflix’s keynote, CEO Reed Hastings said people watched 12 billion hours in Q4 of 2015 alone, up from 8.25 billion at the same time last year. Brian Fitzgerald from Jefferies maintained a Hold rating on Netflix (NASDAQ: NFLX), with a price target of $105. Currently, the analyst consensus on Netflix is Moderate Buy and the average price target is $129.82, representing a 10.3% upside. Financial bloggers seem to have a positive view on NFLX. On the other hand, there is also a lot of social chatter regarding the feasibility of expansion into 130 new countries. On the whole, the market sentiment looks bearish for the day, but might get bullish in the near future.