21 October 2016
Bargain hunters help Asian stocks to rebound after  being hit by panic selling in the past few days. Photo: Reuters
Bargain hunters help Asian stocks to rebound after being hit by panic selling in the past few days. Photo: Reuters

Global stocks rebound but China plunge continues

Volatile global markets got some respite from the latest blood-letting on Tuesday as bargain hunters nudged up Asian and European stocks, though China, at the center of the rout, was smashed again, Reuters reported.

The dollar and oil prices saw their first rises in five days and some of the positions in safe-haven bonds and currencies such as the yen and the euro were also cut as investors nervously dipped their toes back in the still choppy waters.

China’s main equity markets saw another huge 8 percent drop and Japan’s Nikkei slumped 4 percent, but the rest of Asia was calmer overall.

Europe also started on a firmer footing after Monday’s global beating had wiped around 450 billion euros (US$520.7 billion) off the value of its leading stock markets.

The pan-European FTSEurofirst 300 index clawed back 1.7 percent of the more than 5 percent it had lost as London, Paris and Frankfurt bounced 1.5-1.7 percent.

“We are seeing signs of relief with European stocks opening higher despite China extending its losses,” said Piotr Matys, an emerging markets expert at Rabobank in London.

“We are trying to decouple but I think it’s too early to declare the worst is over though and we are out of the woods. The way I see it is that this is a bit of a technical correction after things got a bit oversold.”

The currency market was also calmer. The dollar rose against the yen as it pulled out of a four-day slide that had left it at a seven-month low.

“The recent turmoil has left even the most hardened trader gasping for air. And there’s probably more to come,” said Frederic Neumann, HSBC’s co-head of Asian economics research, in a note to clients.

“China’s economy continues to slow and the [US Federal Reserve] may still hike rates before the end of the year. That puts further cracks into the two main growth pillars for the world economy of recent years: Chinese demand [including commodities] and easy money,” Neumann said.

However, he said a re-run of Asia’s financial crisis in the late 1990s was unlikely.

US stock futures gained 2.0 percent, aiding performance in some markets.

“There appears to be buyback as many markets look oversold after panicky selling in the last few days. Even the shares that had little business ties with China were sold,” said Yukino Yamada, senior strategist at Daiwa Securities.

Mainland Chinese shares had another calamitous day, with the Shanghai Composite Index falling another 8 percent and breaking below the psychological level of 3,000.

The index fell 15 percent the previous three days, including an 8.5 percent collapse on Monday.

Hong Kong’s benchmark Hang Seng Index was a tad higher.

Underlining concerns about China, Japanese Finance Minister Taro Aso said on Tuesday he hoped China would take action to stabilize its economy and that Tokyo had no plan for now to unveil its own new economic stimulus package.

Global share markets have been hit by worries that the Chinese economy, the most important engine for the world economy, was growing at a much slower pace than Beijing’s 7 percent target for 2015.

Investors are also unnerved by uncertainty over US monetary policy. The Federal Reserve has said it plans to raise interest rates this year for the first time in almost a decade.

The heavy fall in share prices worldwide over the past week has sharply reduced expectations of a US rate hike in September, but the outlook is far from clear.

Oil prices also stabilized, after plunging more than 6 percent and hitting six and a half year lows.

US crude futures traded at US$38.73 per barrel, up 1.2 percent on the day, while Brent crude futures last stood at US$43.03 after having fallen to US$42.23 on Monday.

Copper nudged up a fraction to US$4,956 a ton.

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