The Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 3.00 per cent, or 66.56 points, to 2,155.49 on turnover of 480.9 billion yuan. But if China is starting a currency war, investor pain could get intense.
Market participants will be watching out for manufacturing gauges from China and Japan on Friday for fresh insight to how Asia s top economies are growing.
Hong Kong’s Hang Seng Index, which entered a bear market last week, fell 3.5%.
Simon Littlewood, president at business advisory firm ACG Global told the BBC there were concerns that the world’s second biggest economy was “a one-trick pony as they have been trying repeatedly over the past few months to put more liquidity into their economy“, yet so far have failed to calm markets.
“It’s totally premature to speak of a crisis in China“, he was quoted as saying at a press conference held in Italy, reiterating that the IMF’s forecast for China’s 2015 economic growth is 6.8 percent. It also banned selling by major shareholders and told state-owned companies to buy stocks.
“Sliding share prices over the course of the past week have exposed the limits of the government’s interventions to support the market”, said Mark Williams, the chief Asian economist at Capital Economics. “That is the duty of central authorities”, she said.
Lagarde sought to reassure the financial community that at the International Monetary Fund: “We believe that the Chinese economy is resilient and strong enough to withstand that kind of significant variation in the markets”.
US and European equities tumbled after the data, with the Down Jones Industrial Average posting its worst single-day session in four years and all the benchmark indices on Wall Street losing over three percent. “U.S. oil traded below $40 a barrel and nickel slid”. The yen advanced with the euro amid speculation the global selloff will forestall the Federal Reserve’s first interest-rate increase since 2006.
The slump came despite the government’s permission on Sunday to let the pension fund to invest in the stock market.