Text size

While global stock markets look wobbly, digital currency Bitcoin continues to power to new highs.

Bitcoin, in which trading volume is dominated by the Chinese, rose to around $1,875 overnight, with analysts ascribing the surge to investors seeking a hedge against political turmoil. CNBC has a good story looking at growing demand for the crypto-currency beyond China:

To be sure, some investors would not consider a volatile asset like bitcoin a "safe haven," but Kelly and others believe the digital currency has a chance at challenging gold as a go-to safe store of value in turbulent times. Gold futures are up almost 2 percent in the last one week.

Other factors driving bitcoin's price higher included increased demand from

Japan

and

South Korea

. Bitcoin trade volume in both country's currencies rose slightly from prior days, bringing Japan's share to about 40 percent, up from near 36 percent, and South Korea's to about 5.6 percent from roughly 5 percent, according to CryptoCompare.

Both countries are set to open up trading to retail investors in the next few months, Kelly said.

Overall interest in bitcoin has risen in the last month as the future of the technology supporting the digital currency appears more stable. The often volatile currency has a market capitalization of $30.8 billion, according to Coinmarketcap.com.

While digital currencies are soaring, investors shouldn't forget about the world of fiat currencies. China's currency, the yuan, continues to be a hotly debated issue in global trade as to whether its undervalued or overvalued. However, Beijing's use of a daily fixing for the currency has come in sharpened focus given the stronger than expected fixings this month. Bloomberg has done a great job explaining what the People's Bank of China is up to:

China has an insurance policy against a full-scale market meltdown: the daily currency fixing.

With stocks and bonds in retreat amid

over Beijing’s deleveraging campaign, officials have been guiding the yuan higher against the dollar in a move that’s caught market watchers by surprise. After meeting expectations earlier in the year, the reference rate used by the People’s Bank of China to manage the yuan has come in stronger than the forecasts of four banks who regularly track the measure on 24 of the past 31 trading days.

“The PBOC is using the stronger fixings to prevent panic sentiment from spreading to the currency market,” said Xia Le, chief economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong, referring to the reference rate that’s updated each day. “In the short term, no one can fight against the PBOC when it intervenes through the fixings. Investors will likely become more willing to sell the dollar, pushing the yuan higher from current levels.”

The South China Morning Post has an interesting story looking at the slowdown in Chinese overseas deal making. While 2016 was a halcyon year for mergers and acquisitions activity, this year has seen deal volumes struggle. Here's a sneak peek at what's happening:

According to Bloomberg data, China set an outbound takeover record of US$246 billion in 2016. However, in the first four months of this year, international acquisitions have dropped 67 per cent.

But beyond the data lies a treacherous landscape for deal making and telltale signs of recklessness are now emerging.

Capital controls have clearly discouraged China’s outbound M&A activity. Chinese companies, especially those that are domestically listed, will likely have a much harder time funding purchases, particularly if they have not developed offshore financing vehicles or access to offshore banking sources.