BEIJING – Asian stock markets took a battering in the first hours of Monday trading, exacerbating last week’s worldwide stock sell-off over fears that China’s sluggish economy may only get worse. From here, the news only gets worse.

China Market Crash

China’s principal stock market, the Shanghai Composite, los
t 8.4 percent of its value in just a couple of hours and, according to CNN, some of China’s biggest companies, private- and state-owned, took the maximum allowed 10 percent daily loss within an hour. That’s on top of a loss of 11.5 percent last week. The smaller Shenzhen Composite also lost nearly 8 percent Monday morning. –Washington Post

China’s stock markets continued a seemingly uncontrolled drop on Monday, pulling everything from Asia stock exchanges to commodities down further with them. Despite a huge amount of government stimulus, investors have lost faith in China’s stocks and are now focused on an impossible to answer question: how bad will China’s economic slowdown be? The Shanghai Stock Exchange had fallen 8.8% by early afternoon on Monday, breaking through the 3,500 level at which the government has been supporting the market.

Concerns about China’s economic future and falling demand is also causing commodity prices to collapse. The price of Brent crude fell below the $45 mark on Monday for the first time since March of 2009:

The situation, particularly as the US Federal Reserve is expected to begin a monetary tightening phase, is evoking comparisons to the 1997 Asian financial crisis and the 2008 crisis sparked by the U.S. subprime lending. There’s also a growing sense that these market drops are going to be impossible to control.
Yes, as Bloomberg points out, Asian economies are in a healthier spot now than they were in 1997, but interest rates in many countries around the world are already near historic lows, so there’s little wiggle room for the world’s central banks to intervene to try to boost local economies and turn these downturns around. –Quartz

Having seen the nation’s benchmark Shanghai Composite stock index get slammed by 4.21% on Friday, taking its weekly loss to 11.54%, Chinese authorities wheeled out their latest attempt to underpin shaky investor confidence over the weekend, announcing that China’s giant pension fund will be able to increase its allocation in domestic shares to as much as 30%. The decision, given approval by China’s state council on Sunday, could see the fund allocate as much as 1.05 trillion yuan ($164.345 billion) according to a report in the South China Morning Post.
While another huge injection of potential capital, something that may help reduce the pressure on stocks short term, whether it can help address the market slide beyond that remains a highly debatable question at present. All one must do is look at the measures announced in recent months that were designed to stymie market losses. –Business Insider

Post a Comment


Popular Posts