China sneezed and the world caught the selloff panic flu. Weakening investment sentiment in the world’s fastest growing economy --- China --- that saw its stock market rise by around 90 per cent over the past one year led to the fall in the markets worldwide.
And as the Shanghai Composite fell 5.8 per cent, the world’s second fastest growing economy, India, saw its benchmark index the Bombay Stock Exchange Sensex fall by 626 points or 4.1 per cent on Monday.
The crash that began with China and turned Asia into a sea of red, saw the red ink splash across Europe (it fell by 1.1-2.7 per cent), the Americas (1.9-2.9 per cent) and the US (down 2.3 per cent a the time of writing).
“Apprehension of a credit bubble in China on account of a credit growth of $1 trillion in the past six months and a stock
market bubble has led to the fall in Shanghai Composite by 5.8 per cent,” said Amitabh Chakraborty, president equity, Religare Enterprises.
Losses announced by two major Chinese companies in the metals and insurance sectors raised concerns and added to the fall. “This led to a major concern on the macroeconomic front on whether the growth shown by China over the past three to four months is really sustainable,” said Divyesh Shah, CEO, Indiabulls Securities.
All major Asian markets fell sharply, but Japan was a typical case in sentimental contradiction. While its real economy rose (GDP growth of 0.9 per cent in the second quarter), indicating a potential full-fledged recovery, its market fell 3.1 per cent.
Experts also suggested that weak US retail data also contributed to the fall. Oil has fallen by over $5 per barrel over the past two days and was trading at $65.5 per barrel on Monday.