According to BNP Partners, Chinese equities listed on the benchmark Shanghai Composite Index hit 13-month lows this week as investor jitters over the slowing Chinese economy grew and the central bank’s support for the yuan (renminbi) cut into the country’s vast foreign currency reserves.

Capital outflows have accelerated as the nation’s stock markets have shed value and the yuan’s weakness leads investors to flee to the relative safety of the US dollar and the Japanese yen. The new lows effectively wipe out any cold comfort investors may have derived from knowing that, despite last summer’s rout in Chinese stocks, they were still comfortably up on the previous 12 months.

“We’re of the opinion that there may not be a bottoming out of the Shanghai Composite until we hit the 2,500 level,” explained Yannick Touré, BNP Partners’ chief economist.

The Shanghai, China-based investment house has made light of the concerns over capital outflows pointing out the central bank’s efforts to increase liquidity will prove effective. It has also praised the authorities’ decision to abandon circuit-breaker mechanisms that halt trading and its abandonment of market intervention to ease selling pressure.

“With the best intentions, the authorities inevitably ended up muddying the waters and exacerbating the situation with their interventions,” said Gerald E. Powers, Chief Investment Officer at BNP Partners.

“We think it’s important for transparency and normal market operations for stocks to be allowed to find their natural level rather than for the authorities to step in and try to support prices. There will always be investors who lose; governments shouldn’t try to insulate them,” he concluded.

About BNP Partners:
At BNP Partners, they define effective wealth management as an overall strategy that seamlessly integrates their clients’ personal ROI (return-on-investment) aspirations with their investment management prowess.

Whilst today’s markets can often demonstrate the type of characteristics that have served to hamper the efforts of many traditional investment methodologies to secure the returns they once did, BNP Partners continue to secure exceptional returns for their esteemed clients utilizing a meticulously applied combination of those same traditional methods whilst diligently complementing them with new, pioneering techniques.