Latest China Share Crash Spreads Pain Across Asia, Europe

China’s stock markets crashed further on Monday, with the pain becoming sharply felt across Asia.

The Shanghai Composite Index was down by 8.5% on Monday at 3,209.91 points. That came on top of last week’s 12% drop and the 30% fall since the beginning of June.

Media companies felt the full force of the crash. In China companies including Enlight Media, Zhejiang Huace and Wanda Cinema Line were all down by the daily 10% trading limit. Enlight finished at RMB20.62, Huace at RMB22.10, Wanda Cinema at RMB154.35.

Hong Kong-listed Chinese new-media giant Tencent lost 5.02% falling to HK$125.00, while Hong Kong listed Chinese broadcaster Phoenix Satellite lost 8.79% to HK$1.66. Hong Kong free-to-air broadcaster TVB similarly lost 8.13% to land at HK$28.25. Alibaba’s Hong Kong-listed film-making offshoot Alibaba Pictures Group lost 11.8% to finish at HK$1.65.

In Japan, Sony shares crumpled by 7.98% to JPY2,843.5, and Toho by 5.46% to JPY2,751.00. Fuji Media was down 3.81% to JPY1,413, Nippon TV was down 4.85% at JPY2,120.00 and Shochiku was down 4% at JPY960.

Many Indian media stocks beat the local index on the way down. Zee Entertainment Enterprises was off 6.11% at INR359.65, NDTV shed a massive 17% at INR88.40, TV18 lost 8.69% to close at INR311, while Sun TV slumped 11.7% at INR298.5.

Investors have real fears that the Chinese economy, is slowing sharply and that the transformation from a state-led and investment-led economy into a one led by domestic is not happening fast enough.

As China has been a locomotive of growth in recent years that pulled along many other economies there is real fear that pain will be spread to other countries in Asia, Europe and North America is real. That fear was apparent from the reaction of other stock markets on Monday.

Hong Kong’s Hang Seng Index dropped by 5.17% to 21,251.57. Seoul’s KOSPI Index dropped by 2.47% to 1,829.81. Japan’s Nikkei 225 Index dropped by 4.61% to 18,540.68. In Singapore the ST Index crashed 6.77% to 1,332.46. And in Thailand the SET Index was off 3.9% at 1,312.31. In India, the Sensex index was off by 5.94% to close Monday at 25,741.56.

In Europe the FTSE 100 Index opened down and had slipped 2.6% to 6,026.26 by 10.15am local time. Frankfurt’s DAX Performance Index was down 2.5% at 9,866.45 at 11.15 local time, and France’s CAC40 was off 4.91% at 9,866.45 by 11.15am local time.

Making the macro-economic problems worse have been China’s devaluation of the Renminbi, which while adding up to only 4%, came as an unpleasant surprise to many, and has since triggered a round of competitive devaluations by other currencies in Asia.

Moreover, the Chinese government’s multiple interventions over the past month to prop up its stock markets have likely had the opposite effect. By ordering state companies to buy up shares, requiring long lock up periods and banning new IPOs, it has demonstrated government concern that the worsening economic fundamentals should not be allowed to be reflected in share prices. Many of the millions of unsophisticated small shareholders in China are now asking for government compensation, as if share investment were a state-assured one way bet.

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