Talk Money with Tony Field – August 13, 2015

China hopes a weaker currency can give its exporters a boost (AAP)
China hopes a weaker currency can give its exporters a boost (AAP)

There is a great deal of talk in New Zealand about the slowing Chinese economy.

But we are not alone. It is worrying economists and exporters around the world.

On Tuesday the People's Bank of China devalued the currency, the renminbi, by 1.9 percent. Yesterday it devalued the currency for a second day in a row, lowering it by 1.6 percent.

That has really spooked markets. European markets finished more than 3 percent lower this morning.

London's FTSE was down over 1 percent. Wall Street slipped by more than 1 percent, before clawing back the losses. The Dow Jones Industrial Average was flat and the S&P500 and the tech-heavy NASDAQ had very narrow gains.

Commodity prices have been hit too, with oil at a six-year low.

China hopes a weaker currency can give its exporters a boost.

China's exports fell by 8.9 percent last month. Imports were down by 8.6 percent.

We know China is buying fewer dairy products from New Zealand. But it is also importing smaller amounts of a wide range of products, like iron ore from Australia.

China's steel makers are importing less coal, hurting exporters like Solid Energy.

Part of what is concerning people about China is that nobody really knows how fast the economy is slowing.

There is also increasing concern that Chinese officials don't have a firm grip on the situation. First, there was the government's attempts to intervene in the share market. Now, it is trying to intervene in the currency markets.

Here is my chat with Paul Henry about China and Solid Energy.

Chinese e-tailer AliBaba launched on Wall Street last year with much fanfare.

At one point its shares were 76 percent higher than the price they were offered for in their initial public offering (IPO) last September.

But now they are only 7 percent above the listing price (trading at US$73, compared to $68 at the IPO).

The company faces slowing revenue growth, high costs attracting mobile users and headaches managing what is a very diverse range of businesses (retail, cloud computing and logistics).

It has just had its slowest quarterly revenue growth in three years and says that one area causing concern is the domestic retail market in China.

There are concerns that weaker consumer sentiment will impact on AliBaba, particularly after the slump in Chinese stocks.

The concern about weaker consumer spending is also impacting on stocks like Apple, car makers and luxury goods companies.

The New Zealand dollar is trading higher this morning, up more than one percent to 66.21 US cents.

It is also 0.3 percent higher against the Australian dollar at 89.75 cents.

It is 42.39 Pence, 82.25 Japanese Yen and 59.29.

There is still lots of value in media businesses, like The Economist magazine.

Its publisher, the Economist Group, is valued at around £950 million (NZ$2.24 billion).

This is based on the sale of a 50 percent stake in the business by publishing group Pearson.

The main buyer of The Economist Group is Exor (the investment firm for Italy's Agnelli family). It will now have a 43 percent stake in the Economist.

The remaining 7 percent is being sold to the Economist Group itself.

As well as The Economist magazine, the Economist Group includes various other businesses including the Economist Intelligence Unit.

The Economist Group had operating profits last year of £60 million.

It has no controlling shareholder. This is a deliberate move to ensure that the magazine maintains its editorial independence.

Pearson has owned 50 percent of The Economist Group since 1957, when it also bought The Financial Times.

It also recently announced the sale of The Financial Times to Japanese publisher Nikkei for £844 million.

In both cases it is selling because it wants to move away from media to education publishing.

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