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YUAN STORM: Chinese Stock Plunge

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by - 1/8/2016 5550 Views

China Shakes Global Market Again, Why?

China has once again played its cards smartly today to devaluate its currency.  You may ask me why? Well, currency devaluation is a desperate last minute move to boost growth that monetary authorities make when the economy is about to slow down. If Chinese growth indeed slows down, the consequences for the rest of the world, and to the revenues of the companies that deal with China, will be quite significant.

The headlines read “Sensex Crashes to 19 –Month low as China Shakes Global Markets Again”. As the stocks in China crashed, Indian markets fell sharply. The Sensex tumbled over 500 points to below 25,000 while Nifty breached 7,600 - their lowest level in over three weeks. 

The crash in Chinese markets also tremored a sharp fall in other Asian Markets. Japan's Nikkei shed 2.3 per cent while Hong Kong's Hang Seng plunged 2.75 per cent. European markets also fell sharply with major stock market indices in the region down nearly 3 per cent. The Wall Street is also poised to open sharply lower as indicated by US stock futures which were down 1.7 per cent in pre-market trading.

This crash is turmoil in global financial markets. The stock markets were shut down for the rest of the day today, before half an hour after opening as Shanghai shares crashed 7 per cent. This is the second time this week trading in Chinese stock markets were suspended for the day.

Fear of Economic Slowdown in China

Few market analysts fearing the Yuan's quickening slide suggests the world's second-largest economy is in deepening trouble. China continues to be one of biggest markets for many global companies. An economic slowdown in China, which is growing at slowest rate in decades, could impact the earnings of global corporates. Shares of Indian automaker Tata Motors fell over 5 per cent today on concerns that weak economic growth in China could impact the sales of its Jaguar Land Rover unit in that country.

The devaluation of Yuan comes at a time when the US is looking to tighten its monetary policy. "This is perfect storm of everything coming together," said Michael Every, head of financial markets research, for Asia-Pacific at Rabobank. "The more the China devalues they send the message that they would be exporting more. Effectively, China is exporting deflation to the rest of the world which is already struggling with deflation."


Downfall of Metal stocks - Panic Selling

The metal stocks came under strong selling pressure, in the Indian markets on concerns that the devaluation of the Chinese Yuan could make imports cheaper. Oil stocks also tumbled following global crude prices plunging to 11-year lows. Cairn India slumped 8 per cent while ONGC tumbled 4.6 per cent. Among the metal stocks, Vedanta plunged 8.7 per cent while Tata Steel fell 7 per cent.

This fall has immensely affected the already in turmoil, global metal scrap business market.  It is almost like the market players are suddenly feeling that they are standing on sinking sand. Investors, buyers & sellers are left with no clue and solution as to what next? There is a wall of worry under full construction brought on by China


What to Expect?

In conclusion I would close with a famous Wall Street Quote, "Bulls make money, bears make money, but pigs just get slaughtered!" If a person is optimistic and believes that stocks will go up, he or she is called a "bull" and is said to have a "bullish outlook". If a person is pessimistic, believing that stocks are going to drop, he or she is called a "bear" and said to have a "bearish outlook". Pigs are high-risk investors looking for the one big score in a short period of time. Pigs buy on hot tips and invest in companies without doing their due diligence. They get impatient, greedy, and emotional about their investments, and they are drawn to high-risk securities without putting in the proper time or money to learn about these investment vehicles.

Be conservative and never invest in anything you do not understand. Before you plunge without the right knowledge, think about this old stock market saying. Make sure you don't get into the market before you are ready.

Category : General

Tags : Metal Scrap Market, Scrap Market Trend, Chinese Stock Market Trend, Global Market Trend

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About Georgy Abraham

As the bright morning of 28th May dawned in the year 1972, in the fulfillment of time according to the plan & will of Almighty Godbrought me forth into this world and I was brought up & educated in Orissa. My parents provided me with the best of education in an English medium school with high standa .... more info



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