Think Wall Street had a bad week? Hold my beer, said China.
The Shanghai Composite and CSI 300 — which tracks the 300 biggest companies on the Shanghai and Shenzhen exchanges — fell close to 8 per cent this week, keeping them both in bear market territory.
It was a rude awakening for investors there, who returned to the market on Monday for the first time in October, owing to the Golden Week holiday at the start of the month.
Spurring the decline are concerns about China’s economic outlook, which have been exacerbated by the Trump administration’s trade war with Beijing that has imposed tariffs on hundreds of billions of dollars of Chinese imports.
China’s central bank on Sunday cut the amount of cash that commercial lenders are required to keep on reserve in a bid to boost lending and economic growth. That caused the renminbi to weaken.
Underlining the point, the IMF earlier this week cut its growth forecasts for a number of major economies.
Richard Tang at Goldman Sachs said global macroeconomic risks have sent the Asian equity market into what can be defined as a major correction.
“We categorise any decline of less than 20 per cent as a minor correction, and one of 20-40 per cent as a major correction. Based on our 100+ recent conversations globally, investors are currently most concerned about the protracted China/US trade dispute, which seems to be expanding beyond trade itself. Concern about higher US rates has also intensified.”
As on Wall Street, tech and software stocks also led the sell-off in China, Hong Kong and Taiwan, but Mr Tang pointed out that, similarly, these were top performers last year.
The drop for Chinese stocks ranked as their worst week since early February, as did the 4.6 per cent fall for the Euro Stoxx 600, which tracks some of the biggest companies listed in Europe.
Down 4 per cent and driven by Wall Street’s decline, the FTSE All World index was set for its biggest weekly drop since late March, and its third-biggest weekly fall of 2018.
The FTSE Emerging Markets index was down about 1.6 per cent this week, which was its worst week since . . . err, last week, but means the index has fallen for three consecutive weeks.
Brent crude, down 4.6 per cent, faced its worst week since early February.
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