Nomura Research discusses the current market conditions following up on its last week's call for an August volatility shock ahead of a crisis in September (see here).
"Equity markets in China and Hong Kong could turn out to be the Achilles' heel for global markets this summer. In fact, sentiment collapsed noticeably in the Chinese market ahead of the global stock selloff. One root cause of the current risk-off phase may be that equity investors began to price in political and economic disruption in China. The causes are not limited to the US-China trade war, though, but also include localized phenomena such as the current political disruption in Hong Kong," Nomura notes.
"We think investors should be on their guard for now and closely watch moves by speculators," Nomura adds.