Monday, 24 August 2015 12:39
SHANGHAI: Chinese shares plummeted on Monday, wiping out the year’s gains and leading a slump across Asian equities as Beijing’s latest market intervention failed to restore confidence, with concern mounting about the stalling economy.
Chinese stocks have tumbled since peaking in mid-June and authorities have launched broad interventions to try to restrain the drops, but concerns over stalling growth and doubts about valuations continue to drag.
The surprise devaluation of the yuan on August 11 added to fears the world’s second-largest economy is weaker than thought, sparking a sell-off that has wiped more than $ 5 trillion off world equity markets.
The benchmark Shanghai Composite Index plunged 8.45 percent, or 296.54 points, to 3,211.20 by the break — below its closing level on December 31 last year, wiping out all its 2015 gains — after losing as much as 8.59 percent.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slumped 7.61 percent, or 155.24 points, to 1,884.16.
Hong Kong’s benchmark Hang Seng Index fell 4.64 percent, or 1,039.92 points to 21,369.7 by the end of morning trading.
Taipei recorded its biggest-ever intraday drop, at 7.46 percent, while regional markets also slumped, including Tokyo’s Nikkei 225 falling 3.21 percent.
Oil was trading below the $ 40 a barrel mark, at its lowest level since 2009.
“China’s economy is pretty ugly and some sectors have bubbles,” Wu Kan, a Shanghai-based fund manager at JK Life Insurance, told Bloomberg News.
“Selling pressure around global markets is also weighing on local sentiment. The Shanghai Composite may fall to around the 3,000-point level.”
China’s economy, a key driver of global growth, expanded at its weakest pace since 1990 last year and has slowed further this year, growing 7.0 percent in each of the first two quarters.
The yuan devaluation was widely seen as intended to give Chinese exporters — a key sector of the economy — a boost by making their products cheaper abroad.
Concerns growth is decelerating in the world’s number two economy were fuelled on Friday when the preliminary figure for Caixin’s purchasing managers’ index for August, a key indicator of manufacturing activity, slumped to a 77-month low.
US and European equities tumbled after the data, with the Dow Jones Industrial Average posting its worst single-day session in four years and all the benchmark indices on Wall Street losing over three percent.
“The market is going to drop further,” Qian Qimin, an analyst from Shenwan Hongyuan, told AFP, referring to Shanghai equities. “It’s normal as the markets across the whole world are falling.”
