Hong Kong, Shanghai stocks tumble in early trade

Regulators said they would allow the State Pension Fund to invest up to 30 percent of its total net assets in stocks and other equities, but that move was an approval of a policy announced earlier and had no discernable impact on investor sentiment.

Hong Kong’s Hang Seng Index, which entered a bear market last week, fell 3.5%.

A slide in the value of the U.S. dollar against the Japanese yen is hurting shares in Tokyo, where exporters have benefited in the past two years by a weaker yen.

Market “corrections” of this kind have come and gone with some frequency in the post-financial crisis world, but the current bout of panic is being driven by sentiment which we’ve yet to see, says Michael Hewson of CMC Markets.

Investors will be looking to China’s next move after The Wall Street Journal reported that the central bank is preparing to flood the banking system with liquidity to boost lending.

Some Asian stocks fell to three-year lows on Monday following sharp sell-offs last week, sparked by fresh evidence that the world’s second-largest economy was losing more momentum than had been expected.

Sending global equity markets into a tailspin, a Caixin/Markit PMI survey on Friday showed Chinese manufacturing activity shrank at the fastest pace since 2009.

Emerging market economies, many reliant on exporting raw materials, have been hit particularly hard by the spectre of slower Chinese growth and sliding commodities.

The CSI 300 and 500 indices, comprising of the 300 and 500-largest firms by market capitalisation in Shanghai and Shenzhen, are lower by 8.38% and 7.75% respectively.

“The market is going to drop further”, Qian Qimin, an analyst from Shenwan Hongyuan, told AFP, referring to Shanghai equities.

The Turkish lira, its plight exacerbated by domestic political developments, languished near a record low.

For some, the speed of their currency’s fall appeared to have prompted an intervention. Fears over a Chinese “hard-landing” is still sending tremors through global finance; the Shanghai composite has fallen by as much as 9pc this morning, its biggest slump since 2007 and is now in the red for the year to date, despite desperate attempts by Beijing to limit the sell-off.

The dollar was down 0.2 percent at 121.66 yen, adding to Friday’s 1.2 percent plunge. The benchmark 10-year Treasury note yield touched a four-month low of 2 per cent.

The two most important crude futures, U.S. West Texas Intermediate (WTI) and the global benchmark Brent, hit fresh 6-year lows on Mondays to levels last seen during the peak of the credit crunch of 2008/2009.