BullsAndBears

Asian bourses whipped by China stock rout

Investor sentiment shaky as policymakers fail to stem renewed slump; STI sheds 39 points

Asian stocks took a battering yesterday as a renewed savage selldown rocked the Chinese market.

The Shanghai Stock Exchange Composite Index plunged 8.48 per cent - its biggest single-day fall in eight years - amid growing concerns over China's economic slowdown. The country's statistics bureau yesterday turned in a disappointing 0.3 per cent drop in industrial corporate profits last month.

Preliminary figures released last Friday showed that its manufacturing sector slumped to its lowest in 15 months in July.

China's renewed equity slump is a blow for policymakers, who had taken measures to stem a US$4 trillion (S$5.5 trillion) market rout that ran for a month ended mid-July.

"A rapid, post-rout rebound in mainland A shares has ended, and the market has entered a stage of fluctuations, with investor sentiment increasingly unsteady," said fund manager Yang Delong at China Southern Asset Management in a note.

Equities elsewhere in the region were little spared from China's tumble. Hong Kong fell 3.09 per cent, while Japan dipped 0.95 per cent.

At home, the Straits Times Index slid 1.17 per cent, or 39.23 points, to 3,313.42. Some 1.7 billion stocks worth $921.4 million were traded.

The day's losses were led by blue-chip heavyweights such as Singapore Exchange, which sank 32 cents to $8.21, and DBS Group, which dropped 32 cents to $21.08.

This was even as the banking group posted a strong set of second-quarter earnings - a 15 per cent jump in net income to $1.12 billion - before the market opened.

But the stock's fall-off follows a gradual build-up over the last two weeks. A Nomura report noted that the group's performance was "ahead of market and (its) estimates". "Investors will be pleased to know that despite the economic challenges in the region, there was no deterioration in asset quality," it said, maintaining a "buy" rating on the stock.

Commodities giant Noble Group lost 1.5 cents to 62 cents amid a global commodity rout. It announced an $11.3 million share buyback in the morning. Agri-business group Olam International, on the other hand, was among the day's few gainers, climbing one cent to $1.79.

The most actively-traded stock was Catalist-listed waterproofing firm Chinese Global, with 178.2 million shares changing hands. Its shares soared 4.3 cents to 6.3 cents.

On the whole, global equities ended last week on a weaker note, said IG market strategist Bernard Aw.

This was given the persistent sales of commodities and speculation ahead of the United States Federal Open Market Committee meeting, to take place later this week, which could offer more direction to the interest rate hike.

Risk sentiment dented investor confidence on Wall Street last Friday, with the Dow Jones Industrial Average slipping 0.92 per cent.

A version of this article appeared in the print edition of The Straits Times on July 28, 2015, with the headline 'Asian bourses whipped by China stock rout'. Print Edition | Subscribe