Finance Finance News Australian shares slump as Chinese stocks plunge

Australian shares slump as Chinese stocks plunge

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Australian investors are bracing for even more pain after the benchmark ASX 200 Index slumped a staggering 4.1 per cent and shed more than $60 billion on Monday.

Asian stocks sunk deeper into crisis as concerns over China’s slowing economy deepened.

Wall Street and European markets plunged on Friday after Chinese manufacturing activity slumped to its lowest level since 2009.

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The ASX finished the day at its lowest level in more than two years – 5001.3 points.

The All Ordinaries index also plunged four per cent, losing 211 points to close at 5014.

Those are the biggest one-day falls since August 5, 2011, when the United States was stripped of its AAA credit rating by Standard & Poor’s following its brush with sovereign default through the debt ceiling crisis.

Chinese stocks have driven heavy falls around Asia and Australia. Photo: AAP

The indices were close to breaching 6,000 points just four months ago.

The Australian dollar also hit a fresh six-year low of 72.01 US cents.

Australian Stock Report head of research Chris Conway warns the market falls could continue if it drops below 5000 points.

“Right now, there is clearly some panic selling occurring and there is little in the way of technical support below the current market price,” he said.

Shanghai closed down 8.49 per cent, or 297.83 points, the biggest daily loss since February 27, 2007.

Those losses had devastating effects on other Asian stock, with Hong Kong’s benchmark falling 5.17 per cent, Tokyo down 4.61 per cent, and Seoul dropping 2.47 per cent.

Wall Street
Wall Street also suffered a significant fall. Photo: AAP

“Things are probably going to get worse before they get better,” Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd in Sydney, told Bloomberg News.

“You really need rate cuts and more policy easing in China. In the meantime, things can get worse.”

Global equities have lost more than $US5 trillion ($A6.86 trillion) in value since China’s shock currency devaluation on August 11 sparked fears its economy is slowing more than thought.

IG market analyst Angus Nicholson says this is now a key moment for China – its equity markets are in free fall, its banking system is short of liquidity and forecasts of seven per cent economic growth are now looking ambitious.

“The most sensible way forward would seemingly involve further currency devaluation … and stepped up fiscal stimulus,” he said.

The Australian market’s losses were felt across the board – the energy sector dropped 6.2 per cent, financials fell 4.6 per cent and retailers shed 3.5 per cent.

But CommSec chief economist Craig James said worries about China’s economy are over-rated, with authorities there dealing with the “growing pains” of a maturing economy.

Rather than the beginning of a crisis, the market falls are a correction from highs reached earlier in 2015, he said.

“At present we would view the global share market correction as a correction we had to have – a situation that will be beneficial in injecting more value into markets,” Mr James said.

“There are clearly risks, but the data indicates that US and European economies continue to recover; lower oil prices will serve to boost consumer and business spending; and Chinese authorities are trying a range a measures to maintain momentum in their economy.”

-with AAP, ABC

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