|
 Less than half an hour after the market opened, Chinese stock
trading was suspended for a second time this week.
Brent crude prices skidded over 5 percent to an almost-12-year-low
of $32.16 <LCOc1>, with worries over weaker demand from China adding
to a persistent drag on prices caused by oversupply and near-record
output levels.
European stock markets followed Asia lower, with the pan-European
FTSEurofirst 300 index <.FTEU3> down 2.3 percent and the euro zone's
blue-chip Euro STOXX <.STOXX50E> index falling 2.5 percent.
MCCI's 46-country All World index <.WORLD> fell 1 percent to hit a
three-month low, the sixth straight day of losses. The benchmark
emerging stock index <.MSCIEF> slid 2.5 percent to a 6 1/2-year low
as investors dumped risky assets.
"It's looking pretty ugly," said hedge fund manager and chief
investment officer Andreas Clenow at ACIES Asset Management in
Zurich. "We've been scaling down equity positions. It's time to take
a step back to re-evaluate the situation."
 The People's Bank of China (PBOC) set the yuan midpoint rate
<CNY=SAEC> at 6.5646 per dollar, 0.5 percent weaker than the
previous day's fix. That was the biggest decline between daily
fixings since August and the eighth day in row the PBOC had set a
lower guidance rate.
Spot yuan <CNY=CFXS> fell to 6.5956 to the dollar, its weakest since
February 2011. Offshore yuan rates hit a record low of 6.7600 to the
dollar <CNH=>, before erasing its losses after suspected
intervention by authorities.
Other regional currencies followed the yuan down as markets began to
worry about competitive currency devaluations from trading partners.
Singapore's dollar <SGD=> hit a six-year low, the South Korean won
<KRW=> touched a four-month low, and the Malaysian ringgit <MYR=>
slumped to a three-month trough.
Investors fear China's economy is even weaker than had been
imagined, with Beijing, in a bid to help exporters, allowing the
yuan's depreciation to accelerate.
"The lower yuan fixing probably signifies greater risks to the
Chinese economy than we know of, leading to risk-off trades," said
Jeremy Stretch, head of currency strategy at CIBC World Markets.
[to top of second column] |
FLIGHT TO SAFETY
North Korea's announcement on Wednesday that it had successfully
conducted a test of a hydrogen nuclear device added to a growing
list of geopolitical worries for investors.
"Geopolitical tensions stemming from Saudi-Iran tensions and North
Korea's nuclear test had already heightened the 'risk off' mood,"
said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.
"Resurfacing China risk was the extra psychological blow to the
markets that led to the selloff in equities."
As investors fled to safety, the yen rose about 1 percent to 117.615
per dollar <JPY=>, its strongest in 4 1/2 years [FRX/].
Top-rated German bonds, which are also considered a safe haven,
benefited, too. Ten-year yields dropped below 0.50 percent for the
first time in over a month.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> dropped 2 percent to its lowest since late
September. Japan's Nikkei <.N225> shed 2.2 percent.
New rules Chinese authorities introduced this week that restrict
selling by large shareholders did not go down well with investors
and provided little tonic to jittery markets.
"This is crazy. Chinese regulators set off on this path in July and
they cannot get out of it. They have ruined whatever hope investors
still had in the market," said Alberto Forchielli, founder of
Mandarin Capital Partners in Hong Kong.
(Additional reporting by Sudip Kar-Gupta, Anirban Nag in London,
Shinichi Saoshiro, Lu Jianxin, Samuel Shen and Lisa Jucca in Tokyo,
and the Shanghai Newsroom)
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