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China, the greater risk of financial bubbles

The financial crisis Observatory of the ETH Zurich has set itself the target of speculative bubbles in time to see. Worldwide, approximately 600 institutions

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China, the greater risk of financial bubbles

The financial crisis Observatory of the ETH Zurich has set itself the target of speculative bubbles in time to see. Worldwide, approximately 600 institutions use the analyses of the University, including banks, pension funds and sovereign wealth funds.

Today, the ETH Zurich has, in cooperation with the Spin-off of Simag, a current of water the message released, according to a small formation of bubbles between the different analyzed asset classes is observed. "Only for the S&P 500 VIX Futures we see a strong positive bubble activity. This means that the market could be more prone to abrupt volatility shocks," says Economics Professor Didier Sornette. He is the Director of the Observatory.

The VIX Futures allow investors to speculate on violent changes in the stock prices of the 500 largest listed US companies - however, regardless of the direction and level of the share price.

consequences for Switzerland

it is Noteworthy, however, that the ETH looks due to the world economic situation forced, in a new report on the economic risks of Contagion to take. The College stresses above all the importance of China to the world: China's economic growth fell due to internal problems, but also due to the slowdown of world trade on a 30-year Low.

as of weakness of a such a large market, a significant export-oriented public economies, such as Germany under pressure.

From Germany could spread the infection easily to many Eastern European countries. However, even Switzerland, would feel the consequences, because Germany is the main consumer of Swiss export products.

Finally, the question of the role of the Central banks to the language in the report: the money will be invested from new business loans less in the real economy rather than for the buy-back of own shares or for the purchase of financial assets related. This will continue so long as interest rates remained low or negative.

Dietmar Peetz from the ETH Spin-off Simag warns in this context that the Central banks are forcing through its interest rate policy, more and more institutional investors, illiquidity risks: "That the illiquidity premiums are so low, is a typical phenomenon in the late phase of the credit cycle'."

What to bring next year?

With the coming months holding the ETH Zurich: in 2021 could be a year in which the avoidance of the most dangerous financial bubbles is a difference between success and failure make it could. Many stock indexes are at or near historic highs. But the markets wrestle with their upward momentum.

Created: 12.11.2019, 19:16 PM

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