Black Monday as investors dump shares
By Lydia Chen |
August 9, 2011, Tuesday
|
Print Edition
Print Edition
BLACK Monday hit markets in the Asia-Pacific region yesterday as investors scrambled to dump shares following Standard & Poor's downgrade of the long-term credit rating of the United States.
Fears of a spreading debt crisis in Europe accelerated panic selling of equity investments, sending the Shanghai Composite Index down 3.79 percent at close, the biggest daily fall since November 16, to 2,526.82, the lowest since July 19.
South Korea's stocks tumbled the most in nearly two years with the Kospi index dropping 3.8 percent. Hong Kong's Hang Seng Index was down 2.17 percent. Japan's Nikkei 225 fell 2.2 percent. Australia's S&P/ASX 200 Index shrank 2.9 percent while New Zealand's NZX 50 Index lost 2.8 percent
However, the price of gold reached a record high of more than US$1,700 an ounce for the first time as investors sought a safe haven.
"The aversion to risk was a result of worsening confidence among investors after the loss of America's top credit rating," said Gao Ting, head of wealth management research and chief China strategist of UBS. "In China, people are worried whether the country's growth could be hampered when there's a financial crisis going on outside the country."
Copper falls
In yesterday's trading, shares of companies closely connected to China's growth led the falls.
Jiangxi Copper, the largest copper producer, fell 7.24 percent to 9.22 yuan (US$1.43). Fujian Cement Co was down 9.02 percent to 12.21 yuan. China Petroleum & Chemical Corp fell 4.59 percent to 7.07 yuan. China COSCO Holdings Co, the nation's biggest listed shipping company, fell 6.5 percent to 6.9 yuan.
"If economies in the US and Europe are going to sour and markets there continue to be volatile in the next few months, China is expected to see damage at least in the exporting field," Gao added.
Analysts with Guotai Jun'an Securities agreed China might be hurt. The Shanghai-based brokerage expected the economy to slow further or even see negative growth in the second half following a 9.6 percent rise from January to June.
Reversed
It cut its forecast in China's export growth to 15 percent from a previous estimate of 20 percent.
In a note to clients, China International Capital Corp reversed its previous advice to ride on a rebound in China equities, amid concern Europe's debt crisis is worsening.
Managers with the Morgan Stanley Huaxin Fund also warned in a report that China was going through "the darkest time" right now with inflation stubbornly high while the economy was falling sharply.
"Inflation is still the top priority of China, which means it is not likely that the government will loosen its tightening in the short term," Gao said.
He said investors should play a waiting game since markets were likely to face pressure throughout the summer. "Gold could still be the ideal investment because it is the safe haven right now," he said.
UBS maintained its forecast for gold prices at US$1,800 per ounce in the next 12 months, Gao said.
Gold producers gained yesterday.
Zhongjin Gold rose 5.13 percent to 29.74 yuan. Zijin Mining was up 4.18 percent to 5.73 yuan.
Gold climbed to an all-time high of US$1,715.01 an ounce yesterday.
Prices have risen more than 20 percent this year so far.
Fears of a spreading debt crisis in Europe accelerated panic selling of equity investments, sending the Shanghai Composite Index down 3.79 percent at close, the biggest daily fall since November 16, to 2,526.82, the lowest since July 19.
South Korea's stocks tumbled the most in nearly two years with the Kospi index dropping 3.8 percent. Hong Kong's Hang Seng Index was down 2.17 percent. Japan's Nikkei 225 fell 2.2 percent. Australia's S&P/ASX 200 Index shrank 2.9 percent while New Zealand's NZX 50 Index lost 2.8 percent
However, the price of gold reached a record high of more than US$1,700 an ounce for the first time as investors sought a safe haven.
"The aversion to risk was a result of worsening confidence among investors after the loss of America's top credit rating," said Gao Ting, head of wealth management research and chief China strategist of UBS. "In China, people are worried whether the country's growth could be hampered when there's a financial crisis going on outside the country."
Copper falls
In yesterday's trading, shares of companies closely connected to China's growth led the falls.
Jiangxi Copper, the largest copper producer, fell 7.24 percent to 9.22 yuan (US$1.43). Fujian Cement Co was down 9.02 percent to 12.21 yuan. China Petroleum & Chemical Corp fell 4.59 percent to 7.07 yuan. China COSCO Holdings Co, the nation's biggest listed shipping company, fell 6.5 percent to 6.9 yuan.
"If economies in the US and Europe are going to sour and markets there continue to be volatile in the next few months, China is expected to see damage at least in the exporting field," Gao added.
Analysts with Guotai Jun'an Securities agreed China might be hurt. The Shanghai-based brokerage expected the economy to slow further or even see negative growth in the second half following a 9.6 percent rise from January to June.
Reversed
It cut its forecast in China's export growth to 15 percent from a previous estimate of 20 percent.
In a note to clients, China International Capital Corp reversed its previous advice to ride on a rebound in China equities, amid concern Europe's debt crisis is worsening.
Managers with the Morgan Stanley Huaxin Fund also warned in a report that China was going through "the darkest time" right now with inflation stubbornly high while the economy was falling sharply.
"Inflation is still the top priority of China, which means it is not likely that the government will loosen its tightening in the short term," Gao said.
He said investors should play a waiting game since markets were likely to face pressure throughout the summer. "Gold could still be the ideal investment because it is the safe haven right now," he said.
UBS maintained its forecast for gold prices at US$1,800 per ounce in the next 12 months, Gao said.
Gold producers gained yesterday.
Zhongjin Gold rose 5.13 percent to 29.74 yuan. Zijin Mining was up 4.18 percent to 5.73 yuan.
Gold climbed to an all-time high of US$1,715.01 an ounce yesterday.
Prices have risen more than 20 percent this year so far.
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