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China fall hits the globe, again

business Updated: Aug 19, 2009 20:33 IST
HT Correspondent

The volatility and correction in stock markets worldwide continued on Wednesday as concerns around sustainability of the economic growth in China and its stock markets being overpriced, gained momentum.

Shanghai Composite, China’s benchmark index, fell 4.3 per cent on Wednesday as it witnessed the second big fall in three days. Between Monday (when it fell 5.8 per cent) and Wednesday, it has crashed by 9.4 per cent.

India felt its reverberations as the Bombay Stock Exchange Sensex fell by 225 points or 1.5 per cent on Wednesday to close at 14,809. The more broad based NSE Nifty fell by 65 points or 1.5 per cent to close at 4,394.

The fall in the Sensex was led by three sectors — oil and gas, metals and auto, which fell 2.9 per cent, 2.3 per cent and 2.1 per cent respectively.

The fall in Chinese stocks reflects mounting concerns on its real economy. China’s exports fell 23 per cent in July 2009 over the previous year.

“The recent data on sharp decline in lending in July is worrying,” said Anup Bagchi, executive director, ICICI Securities. “Further concerns on comments by the central bank to finetune monetary policy is hinting at a liquidity squeeze.” Resulting in the fall.

“Liquidity is expected to dry up from the secondary market as there are some big public issues lined up in China,” said Alex Mathews, head of research, Geojit Securities.

While China relaxed its credit policy and lent $1.08 trillion (about Rs 52,68,000 crore or more than India’s GDP) in the first six months of 2009, there are concerns over corporate profit growth and a credit bubble in its economy.

Barring the stockmarkets of Australia, New Zealand and Israel, all closed in the red. At the time of writing, the US market, already weighed down by a recession and negative GDP growth, was down 0.6 per cent, while the entire Europe was in the red.