China's biggest share market fall since 2007 led an Asia-wide rout

Photo: ChinaFotoPress / Getty Images

Fresh from being slammed by more than 4% on Friday, a sell-off which took weekly losses to more than 10%, Chinese stocks were hammered yet again on Monday.

At the close the benchmark Shanghai Composite index fell 8.492% to 3209.91, taking its losses from the multi-year peak of 5178.2 hit on June 12 to 38%.

It is now trading at the lowest level since mid-March, and has wiped out all of this year’s gains.

At 8.49%, it was was the largest one-day percentage decline since February 27, 2007, slightly overshadowing the previous largest plunge of 8.48% recorded on July 27.

It was also the sixth-largest percentage decline on record since daily down-limits of 10% were first introduced on December 16, 1996.

Still, adding some perspective to the recent losses, the index is still up 43% from levels of a year earlier.

Unsurprisingly, the carnage in Shanghai was replicated across other Chinese markets.

The CSI 300 and 500 indices, comprising of the 300 and 500-largest firms by market capitalisation in Shanghai and Shenzhen, fell by 8.75% and 7.97% respectively.

The Shenzhen Composite and ChiNext indices also closed down more than 7.5%.

The SSE 50, an index that contains the 50-largest stocks by market capitalisation in Shanghai, fell by a jaw-dropping 9.35%.

The losses come despite news over the weekend that China’s giant pension fund will now be allowed to invest as much as one trillion yuan in domestic stocks – the latest in a long line of attempts from the government to address the slide in Chinese markets.

Reflective of the incredibly bearish price action witnessed in Chinese stocks, risk assets across the region tumbled.

The ASX 200 in Australia fell 4.09%, taking the index to the lowest level closing level since July 19, 2013. It was the largest percentage decline since January 23, 2009 and the largest in points terms since November 13, 2008.

Elsewhere the Nikkei in Japan tumbled 4.61%, closing at the lowest level since February 23 this year. Like the ASX 200, the decline set a raft of unwelcome market records.

It was the largest percentage decline since June 13, 2013 and the largest points decline since May 23, 2013 – the day the US taper tantrum really took hold.

From the market peak on August 12, the index has lost 11.49%, marking a technical correction.

Not to be outdone, stocks in South Korea and Taiwan finished with losses in excess of 2.47%.

Making those declines look tame, the Philippines stock exchange fell 7.2%.

In late trade stocks in Singapore, Thailand and Hong Kong are lower by 3.64%, 3.84% and 4.82% respectively.

Like stocks, currency markets are also in turmoil.

The Australian and New Zealand dollars have fallen 1.2% against the US dollar and near 2% against the Japanese yen. The euro is the session outperformer, up 0.70% at 1.1467 as long carry trade bets in higher-yielding currencies such as the Aussie and Kiwi are unwound.

Reflective of the risk off theme, the Swiss franc has strengthened by 0.59%. Elsewhere the US dollar is modestly bid against the British pound, Singapore dollar, Chinese yuan and South Korean won.

Commodity prices are also nosediving.

US crude futures are down 3.19% at $39.16, the lowest level seen since the height of the global financial crisis.

Chinese iron ore, rebar and coking coal futures are off by between 2.67% to 4.33% while copper has lost an additional 1.56%.

Gold, having outperformed on the back of heightened market volatility on Friday, is trading lower. The spot price has lost 0.4% and currently trades at $1155.436 an ounce.

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