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Asian stock markets swing wildly as Chinese shares take another battering Asian stock markets swing wildly as Chinese shares take another battering
(about 2 hours later)
Markets across Asia were hit by more turbulence on Tuesday, with Chinese shares suffering a dramatical fall of more than 6% a day after hundreds of billions of dollars were knocked off global stocks. Related: Dow plunges after rollercoaster trading on ‘Black Monday’ for global markets
As the gravity of China’s market woes – dubbed “Black Monday” by the country’s official news agency – continued to sink in, stock markets in the region were hit by wild fluctuations in their fortunes in early trading. Markets across Asia experienced more turbulence on Tuesday, with Chinese shares suffering a dramatic fall of more than 6% a day after hundreds of billions of dollars were knocked off global stocks. As the gravity of China’s market woes continued to sink in – following a trading session dubbed “Black Monday” by the country’s official news agency – stock markets in the region were again hit by wild fluctuations.
In Tokyo the Nikkei fell 3.8% to below 18,000 points – a six-month low, before recovering to parity, while the MSCI’s index of Asia-Pacific shares outside Japan hit three-year lows. The Shanghai Composite index fell 6.4% in the first few minutes of trading on Tuesday before clawing back ground later in the day. There was better news from other regional markets, with Japan’s Nikkei making some gains after losing 4.6% the previous session – to some extent easing concerns that the pounding dealt to markets around the world would continue.
Australia’s ASX200, South Korea’s Kospi and Hong Kong’s Hang Seng also showed gains as the trading today went on. The MSCI’s broadest index of Asia-Pacific shares outside Japan went up 1.7% after an initial dip to a three-year low.
Policymakers in Japan called on Chinese authorities to take action to prevent further dramatic slides. The Shanghai Composite’s falls continued despite a US$24bn injection of liquidity by China’s central bank on Tuesday.
Japan is concerned about the yen’s rise against the dollar in recent days, as a stronger Japanese currency eats into the profits of Japanese automakers and other exporters. The finance minister, Taro Aso, said he hoped China would take action to stabilise its economy, but added that Tokyo had no immediate plans to introduce its own stimulus package.
Aso later warned market players against pushing up the yen – seen as a “safe haven” currency” – too much further, saying that its spike against the dollar overnight was problematic for Japan’s economy.
Related: Asian stock markets recover amid wild swings after Wall Street slump – liveRelated: Asian stock markets recover amid wild swings after Wall Street slump – live
The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 55.85 points, or 3.77%. He said there were no plans as yet for co-ordinated action among G7 and G20 countries. “I would say [the yen’s rises overnight] are rough, rather than rapid,” Aso said. “For the economy to grow stably, it’s better for [currency and stock price] moves to be gradual and steady, rather than rough.”
But there was also cause for guarded optimism. The economics minister, Akira Amari, said the flurry of yen buying was proof of Japan’s sound economic fundamentals, adding that it was up to the Bank of Japan to decide whether or not to ease monetary policy with more quantitative easing to force the yen back down. The yen surged nearly 5% to a seven-month high against the dollar on Monday as investors worried about the slowdown in China bought the relatively risk-free Japanese currency.
Australia’s ASX200 mounted a comeback, rising 1.27%, while South Korea’s Kospi index was up 0.36%. Singapore’s Hang Seng rose 1.3% after a 0.6% fall at the open. The dollar rebounded to the upper 119 yen zone later on Tuesday in Tokyo. At noon the US currency fetched 119.86-87 yen after plummeting to as low as 116.15 yen in New York overnight.
With the investor sell-off seen on Monday set to continue, policymakers in Japan called on Chinese authorities to take action to prevent further dramatic slides. All eyes were on how Chinese markets would respond throughout Tuesday, amid reports that the country’s leadership is running out of ideas to stabilise the world’s second-biggest economy.
The Shanghai Composite index lost 6.4% in early trading, despite a US$24bn dollar injection of liquidity by China’s central bank during open market operations. China is facing a slowdown in economic growth, the banking system is short of cash and investors are pulling money out of the country. Chinese shares led Monday’s market meltdown, plunging more than 8% to post their biggest losses since 2007.
The yen, seen as a “safe haven” currency, has strengthened against the dollar in recent days, eating into the profits of Japanese automakers and other exporters. “A co-ordinated policy response is critical and much of this needs to come from Asian economies,” said Bernard Aw at IG Markets. “A spate of better economic news may help to allay concerns that global growth is not deteriorating. Certainly improvements in the Chinese economy will be welcomed.”
Japan’s finance minister, Taro Aso, said Tuesday morning he hoped China would take action to stabilise its economy but added that Tokyo had no immediate plans to introduce its own stimulus package. Mark Williams of Capital Economics said investors were “overreacting” to the economic risks in China.
Aso later warned market players against pushing up the yen too much further, saying that its spike against the dollar overnight was problematic for Japan’s economy, although he said there were no plans as yet for coordinated action among G7 and G20 countries. “The surge in prices that started a year ago was speculative, rather than driven by any improvement in fundamentals,” Williams said. “A combination of poor data and policy inaction in China may have triggered today’s market falls but the bigger picture is that we are witnessing the inevitable implosion of an equity market bubble.”
“I would say [the yen’s rises overnight] are rough, rather than rapid,” Aso told reporters after a cabinet meeting on Tuesday. “For the economy to grow stably, it’s better for [currency and stock price] moves to be gradual and steady, rather than rough.” Investors, worried that the Chinese economy is growing at a much slower pace than Beijing’s 7% target for 2015, have also been spooked by uncertainty over US monetary policy. The heavy fall in share prices has tempered expectations that the Federal Reserve will raise interest rates in September, according to some analysts.
The economics minister, Akira Amari, said the flurry of yen buying was proof that Japan’s economic fundamentals were sound, adding that it was up to the Bank of Japan to decide whether or not to ease monetary policy with more quantitative easing to force the yen back down. “There seems to be no consensus with the Fed on whether they are worried about acting too prematurely or too late,” said Toru Yamamoto, chief bond strategist at Daiwa Securities. On Monday the Dow Jones industrial average briefly fell more than 1,000 points before mounting a recovery. Still, the day ended with a loss of 588 points, the Dow’s eighth-worst single-day point decline.
The Japanese currency surged nearly 5% to a seventh-month high against the dollar on Monday as investors, worried about the slowdown in China, bought the relatively risk-free Japanese currency.
Early on Tuesday the dollar had recovered slightly, trading in the upper 118 yen range. The dollar had plummeted to as low as 116.15 yen in New York overnight.
All eyes were on how Chinese markets would respond throughout Tuesday, amid reports the country’s leadership is running out of ideas to stabilise the world’s second-biggest economy.
China is facing a slowdown in economic growth, the banking system is short of cash, and investors are pulling money out of the country. Chinese shares led Monday’s market meltdown, plunging more than 8% to post their biggest losses since 2007.
Investors, worried the Chinese economy is growing at a much slower pace than Beijing’s 7% target for 2015, have also been spooked by uncertainty over US monetary policy. The heavy fall in share prices has tempered expectations that the Federal Reserve will raise interest rates in September, according to some analysts.
“There seems to be no consensus with the Fed on whether they are worried about acting too prematurely or too late,” said Toru Yamamoto, chief bond strategist at Daiwa Securities.
On Monday the Dow Jones industrial average briefly fell more than 1,000 points before mounting a recovery. Still, the day ended with a loss of 588 points, the Dow’s eighth-worst single day point decline.