China has been one of the main emerging markets for many
investors as the country's economy has grown strongly and
the government has sold stakes in some of its biggest and
most attractive companies.
However, the government has been looking at ways of slowing
growth in order to stop the economy from overheating, and
many investors are worried that it may lead to tougher
regulations that will limit stock-market investment.
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Original source URL:
http://news.bbc.co.uk/2/hi/business/6400789.stm
World stocks plummet on China woe
Global stock markets have slumped, with the US Dow Jones index plummeting by
more than 500 points and London's FTSE 100 posting sharp losses.
The sell-off was sparked by a near-9% slide on the Shanghai Composite Index, as
investors worried that China may pass rules to limit demand for stocks.
The Dow Jones was quoted down 507.99 points, or 4%, at 12,124.27 in late
afternoon trading on Wall Street.
The FTSE 100 closed on a fall of 2.3%, or 148.6 points, to 6,286.1.
Earlier in the day, Hong Kong's Hang Seng index had ended trading on a loss of
1.8%, while Japan's Nikkei 225 index slid 0.5%.
"The sell-off in China continues to have a profound effect on stocks across the
board, since the largest unwinding in the Shanghai Composite Index since 1997
leaves investors questioning the sustainability of stock gains everywhere," said
analysts at Briefing.com.
'Sense of panic'
Foreign companies which are particularly exposed to China have been badly
affected
Peter Dixon, Commerzbank
Investor sentiment on Wall Street was also knocked by figures showing that US
growth may be slowing down more than anticipated, with a government report
earlier showing that orders for durable goods in January had dropped by the
largest amount in three months.
"As the afternoon has progressed, there seems to be a sense of panic among some
professional investors," said Andre Bakhos, president of Princeton Financial
Group.
"There seems to be just an air of nothing is safe anymore, there's nowhere to go
and people are rotating into bonds as a safe haven."
However, shortly after hitting its late-hour 500 point fall, the Dow showed some
signs of recovery and was trading down at about 3% shortly before the close.
The technology-laden Nasdaq index was quoted down 78.96 points at 2,425.6, while
the S&P 500 was down 46.80 points at 1,402.6.
Tougher rules
China has been one of the main emerging markets for many investors as the
country's economy has grown strongly and the government has sold stakes in some
of its biggest and most attractive companies.
However, the government has been looking at ways of slowing growth in order to
stop the economy from overheating, and many investors are worried that it may
lead to tougher regulations that will limit stock-market investment.
At the same time, there are concerns that interest rates will have to be raised
in order to rein in economic and price growth, further denting domestic demand
for shares.
"Foreign companies which are particularly exposed to China have been badly
affected," said Peter Dixon, an economist at Commerzbank.
"These companies basically will suffer in the event of things going sour in the
Chinese market."
Standard Chartered, a lender that focuses on emerging markets, was one of the
biggest UK decliners on Tuesday despite reporting earnings that topped analysts'
forecasts.
Standard Chartered was down 4% at 1,450 pence.
Digging down
Also hurting UK shares was a newspaper report that South Africa may consider
asking companies in the mining industry to pay an extra tax.
The news hit shares of mining firms, with Xstrata losing 6.7%, Vedanta Resources
shedding 4.9%, Anglo American down 4.7%, BHP Billiton falling 6.2%, and Rio
Tinto sliding 4.8%.
South African newspaper Business Day said the government may ask mining
companies to pay an additional tax on top of the royalties they already pay when
commodity prices climb above a certain level.
Commodity prices have climbed to record levels in recent months.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6400789.stm
Published: 2007/02/27 21:01:00 GMT
© BBC MMVII
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