Chinese equities are not overall in bubble territory but valuations remain stretched and there is possibly a bubble in small cap. However, the current boom-bust is less severe than the one China experienced in 2006-08.
We expect the impact on growth from the stock market plunge to be modest. The property market is much more important for growth in China and is currently improving.
Longer term, there is the potential for a negative impact from the equity collapse on economic and financial reforms if markets lose confidence in the stock market.
China concerns are set to weigh on base metals and iron ore short term but we do not see any substantial impact medium term as China's property market improves.
Oil prices are to a greater extent driven by the Iran nuclear negotiations and the oil supply.
Commodity currencies have been hit by the commodity slowdown, not by Chinese equities. CEMEA currencies are not immune to the commodity fall but are less vulnerable than Latin America. We expect USD/CNY to remain stable despite the equity collapse.
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