In yesterday’s Greek referendum on whether to accept the bailout deal presented by the Eurozone there was a divisive no vote. In a turnout of just over 62.5%, 61.31% voted no and 39.69% voted yes. The Greek Finance Minister Yanis Varoufakis said this morning that with the scale of the no vote Greece will call on its creditors to find some common ground adding the no vote is a big yes to a democratic Europe, then promptly resigned!! The self-proclaimed "erratic Marxist" said in a statement "I was made aware of a certain ‘preference’ by some Eurogroup participants, and assorted ‘partners’, for my... ‘Absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement". However German economy Minister Sigmar Gabriel later said it was hard to imagine talks on a new bailout programme with Greece.

This morning German Chancellor Angela Merkel travelled to Paris to discuss the referendum result with her French counterpart Francois Hollande with the heads of the European Commission, Donald Tusk, the ECB’s Mario Draghi and Eurogroup chairman Jeroen Dijsselbloem holding a conference call. There will also be an emergency Eurozone heads of states meeting tomorrow. After the morning meeting a spokesman for Merkel said “With regard to yesterday's decision by Greek citizens the preconditions for entering into negotiations over a new aid programme do not currently exist” however the door for talks was “always open”. He went on to say “Greece is a member of the Euro. It is up to Greece and its government to act so that this can remain the case”

On the back of the Greek vote currency markets were initially subdued. The euro did initially dip against the dollar to 1.0969 before rallying back to 1.1026. UK, French and German government bonds yields fell between 2.5 and 4.5 basis points (bps) whilst southern EU countries (Spain, Portugal and Italy) yields rose between 9.5 and 19 bps. Greek government two-year bond yields rose over 1450 bps to yield 48.26% with the ten-year yield rising 325 bps to 17.27%. European equity markets are down anywhere between 1 and 3%.

The next 48 hours will be a critical period for both Greece and the EU and could well shape both for many years to come.

With the situation in Greece still weighing heavy on investor sentiment, eyes turned to China who announced over the weekend that they would be taking steps to prop up the country’s equity market; which has been one of the best performing indices this year but has recently seen around USD 3tn in market value wiped out.

It all began when the market started to “overheat”, the Shanghai Composite Index (or A-Share Index) had gained over 150% in the 12 months to the peak on June 12, or a gain of roughly USD 6.5tn. The China Securities Regulatory Commission (CSRC) took steps to cool the market by cracking down on over-the-counter margin usage; which some reports suggest reached as much as 9.5% of the A-share’s market free-float. This then led to the aggressive unwinding of margin trading which quickly saw the market sell-off. Policymakers have since introduced a number of easing measures; the more recent interest rate and trading fee cuts have so far been unsuccessful in stemming the country’s recent equity market landslide.

Clearly further measures were required as the A-Shares index was down around 29% from the highs in June to Friday's close. So over the weekend Beijing announced a number of key measures to help support the equity market, these include: the collective pledge between China’s top 21 brokerages and asset managers to invest roughly RMB 120bn into a stock market stabilisation fund. In addition, the Shanghai and Shenzhen stock exchanges suspended 28 - already approved - initial share offerings or IPOs as a measure to ease any potential liquidity shock. Lastly, on Sunday the CSRC approved the broadening of liquidity support for China Securities Finance Corporation (CSF) via the People’s Bank of China (PBoC); the amount of registered capital will be boosted from RMB 20bn to RMB 100bn in order to “enhance its capacity to safeguard market stability.”

The market is showing signs of stabilising having dipped slightly this morning, year to date the Shanghai Composite Index is still up over 16% (at time of writing). There are obvious concerns surrounding the global ramifications of a China equity crash, but it is very clear that Chinese authorities will continue to support the market and will likely deploy further measures if necessary.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.