Chinese stocks plunge again, leading global rout
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China’s stock market led the rest of the world higher in the spring rally. Now it’s leading again -- as investors bolt for the exits on fresh doubts about the global economy.
The Shanghai market sell-off that began Aug. 5 accelerated today, driving the main index down 176.34 points, or 5.8%, to 2,870.63, in the biggest one-day slump since November.
The index now has plummeted 17% from its 2009 high on Aug. 4, after rocketing 91% since Dec. 31.
China’s dive has helped fuel selling around the globe. Stocks slid 3.1% today in Japan, 2% in Germany, and prices are down sharply on Wall Street, with the Dow Jones industrials off 153 points, or 1.6%, to 9,163 at about 9:15 a.m. PDT.
Chinese speculators who’ve been looking for an excuse to cash out found plenty today: Ping An, the country’s No. 2 insurance firm, reported weaker-than-expected first-half earnings; Yunnan Copper reported a first-half loss and said there were “no clear signs†of a recovery; and the government said foreign direct investment in China plunged nearly 36% in July from a year earlier.
From Bloomberg News:
“These disappointing earnings from big companies have reaffirmed concerns that share prices have moved ahead of fundamentals,†said Zhang Ling, who helps oversee about $7.21 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “The correction will continue.â€
The Shanghai gauge trades at 31 times the reported profit of its companies, compared with a price-to-earnings ratio of 18 times for the MSCI Emerging Markets Index.
“Valuations are at such a stretched level that a correction is overdue,†said Yan Ji, who helps oversee about $850 million at HSBC Jintrust Fund Management Co. in Shanghai. “There may be another 20% or 30% downside for the index.â€
The U.S. stock market, too, has been flashing classic warning signs in recent weeks that at least a short-term sell-off was imminent after the heady gains since July 10.
-- Tom Petruno