Global stocks drop on China

Global stocks drop on China

THE Chinese stock market suffered its biggest fall in three months yesterday as the Government tried to hose down the bull run.
In an effort to counter the runaway optimism that has pushed the index up more than 60 per cent since the start of the year the Chinese Government yesterday tripled the tax on securities transactions.
Jittery Australian investors pushed the ASX 200 index down 1.1 per cent at 6243 points, but all eyes will be on today's stock market movements.
But Australian economists and stockbrokers said while there may be some knee-jerk reactions the overall economic picture in China was still strong and there was unlikely to be any repeat of the late February slump in global stock markets.
The rout in February sparked a global sell-off that wiped out more than US$3.2 trillion of stock market value.

Drop won't last

AMP chief economist and head of investment strategy Shane Oliver said that in February it was a combination of events that wiped almost $70 billion off the local market in four days.
"Investors have become smarter and now know the link between the Chinese stock market and the economy is tenuous," he said.
"Short-term moves in Chinese shares are of little consequence for the Chinese economy and as such should have little lasting impact on global share markets.
"In February the global slump was triggered by a slowdown in China, worries about sub-prime lending market in the US and weak economic data. It doesn't look like we're going to see anything of that magnitude this time around."

Global stocks fall

The government decision sent the Shanghai exchange down 5.4 per cent to 4112 points.
Yesterday's losses also pushed down Japan's Nikkei market by half a per cent and Hong Kong's Hang Seng Index fell 1 per cent.
In early trading, the European markets lost ground with the British FTSE down 0.7 per cent.
Wise-owl.com analyst Tim Morris said if there is a major fall in the US overnight then it might just be the excuse some investors wanted to give the Australian market a breather.
"The Australian market has been running very hard recently so a short-term slowdown might be just the excuse that some people are looking for but by the end of the year the market will be higher," he said.
In the past 12 months, the Shanghai market has soared 160 per cent, while the predominantly small cap Shenzhen market has risen 212 per cent on a wave of crazy optimism.
The tax on stock market transactions is a response to a market rally that has been attracting more than 300,000 new investors a day.
Mr Morris said the biggest problem in China is that small retail investors are treating it "like a casino" and betting on companies because of "numerology or colours".
This month China's central bank raised interest rates for the second time, in an effort to encourage people to save rather than invest in stocks.