By Darrell Martin
When checking the news lately, words such as ripple effect, devaluing of currency, contingency plan and more gyrations are what traders may see. Something as big as Brexit causes changes around the world and that is where the ripple effect comes into play.
By Monday, June 27, reports of the Big Three Credit Rating Agencies: Standard & Poor’s (S&P), Moody’s and Fitch Group, had all downgraded the credit rating of the United Kingdom. Chinese Premier Li said Monday, “a disillusioned British butterfly has flapped its wings and the entire global financial system could collapse.”
Since the Brexit vote caused a plunge in offshore Yuan, the People’s Bank of China devalued Yuan fix by 0.9 percent. Li went on to say an increase in instability in a particular country or region could trigger the “butterfly effect.” This could, in turn, affect the global economic recovery and financial market stability. He also stated, “All economies are highly dependent on each other and no country can manage alone. See complete article at Zero Hedge.
United Kingdom citizens may not have realized the implications their votes would have on the global community. By China devaluing their currency, a ripple effect could cause challenges for India, whose foreign currency debt now stands at $0.5 trillion (25 percent of GDP). Some brokerages worry that further devaluation would mean the SENSEX (S&P BSE SENSEX) may hit 22,000.
Furthermore, reports Tuesday and Wednesday claim intervention by Chinese authorities to support offshore yuan in morning trading. After falling 1.2 percent since Brexit, “the People’s Bank of China does not want to see the offshore yuan depreciating too fast,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. See Bloomberg news article.
Amid all of these reports, traders have a capped risk avenue to trade the Asian markets. The North American Derivative Exchange, Nadex, offers Stock Index Futures based on China A50 and Nikkei.
Marketed by Nadex as China 50, it is based on SGX FTSE Xinhua China A50 Index Futures. These are 50 firms on the SSE and Shenzhen exchanges. Nadex’s version of the Nikkei is Japan 225. It is based on SGX Nikkei 225 Index Futures. It tracks the activities and sentiment of the Japanese stock market.
When trading with Nadex, your risk is capped and known before a trade is entered. You will never receive a margin call. Both Binary options and spread trades are available for these instruments and Nadex offers low fees. The CFTC- Commodity Futures Trading Commission regulates Nadex, which is a US government agency overseeing futures, options and swaps trading. The CFTC’s mission is to protect market users and the public from fraud, manipulation, abuse and systemic risk.