China’s Shanghai Composite plunged further this morning, opening more than six per cent down – but other major indices in Asia regained ground in morning trading as investors made the most of yesterday’s bloodbath.
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Where is China’s “national team”, the one that comes to bail out the market when Shanghai’s benchmark index falls below 3,500?
“It’s totally premature to speak of a crisis in China“, Carlo Cottarelli, IMF executive director representing countries such as Italy and Greece on its board, told a press conference, reiterating the global lender’s forecast for a 6.8% expansion of the Chinese economy this year, below the 7.4% growth achieved in 2014.
“There appears to be buyback as many markets look oversold after panicky selling in the last few days”.
At the heart of the selloff are concerns that the Chinese economy may be slowing down more dramatically than previously thought. The sharp fall sparked a global sell-off, with the Dow Jones in the US losing 6%, while the UK’s FTSE 100 posted its biggest weekly loss this year of 5%.
The gloom was shared across the region, prompting many to term it “Black Monday” even before the day’s trade was over.
In South Korea, another country extremely vulnerable to any slowdown in China, the benchmark Kospi Composite index was down 2.5 percent.
In Australia, the S&P/ASX 200 was down by 2.9 percent to 5,063.50 points. The gauge lost 12 percent last week, despite State Council granting pension funds access to equities for the first time over the weekend.
Today’s stock market showcased an interesting development in China: People’s confidence in Beijing was shaken.
Analysts at UBS said that central banks stand ready to provide support if sentiment worsens.