InvestmentsAug 18 2015

Chinese equity market falls over 6 per cent

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Chinese equity market falls over 6 per cent

China’s benchmark Shanghai stock index fell more than 6 per cent in late trading on Tuesday.

The Shanghai Composite Index dropped 6.2 per cent to 3,748.2. Meanwhile, the Shenzen Composite Index, which tracks stocks on China’s second exchange, fell 6.6 per cent.

All the sectors were hurt in the fall, with utilities losing 7 per cent. Exchange rules do not permit individual stocks to lose more than 10 per cent in a day. On Tuesday, 40 of the 1,114 listed companies were just off the limit.

The index fall marks the biggest one day drop since July 27, when the Shanghai index plummeted 8.5 per cent, the second biggest one day fall in the past 15 years.

Commentators have struggled to explain the latest fall, given the lack of economic data released today.

However, investors have been on edge since they were shocked last week by The People’s Bank of China lowered the daily fixing for the yuan. The central bank lowered the fix by 1.9 per cent on Tuesday and by a further1.6 per cent on Wednesday.

The initial move, while minor compared to typical currency devaluations, was the largest ever made by China.