Volatile Chinese markets drive nervous investors to offload
The Chinese stock market is registering a volatile trading pattern as investors became nervous about the future course of the market. The slowdown in the dragon country's economy growth has become a cause of concern for the investors.
Adding to this, forecasts about a possible hike in interest rate by US Federal Reserve in September have further dampened the market sentiment. As a result, panic-driven investors are withdrawing their investments from emerging economies.
Reflecting the weak market sentiment, Shanghai Composite Index further dropped 1.96% or 74.28 points to 3719.83 points on Thursday. The index suffered a net loss of over 6.8% during the past one month owing to uncertainty conditions in the Chinese stock market.
Concerns about the slowdown in China's growth is not only affecting the world's second largest economy but also has dampened the global market sentiment. China growth supported the global economy after the financial crisis that began in 2008, but the latest slowdown will affect the industry and commodities market as well.
Daisuke Uno, a chief strategist at Sumitomo Mitsui Bank, said: "Markets are nervous of risks and investors are pulling funds out of emerging economies and resource exporters."
Moving in tandem with Chinese indices, Japan's Nikkei too eased 0.3% in early trade on Thursday. MSCI's broad index of Asia-Pacific shares outside Japan was also trading flat at its two-year low level.
Several resource-exploring emerging economies are hit by the oil price drop and weaknessin the commodities market.
MSCI emerging market index dropped to four-year low. The US crude future contract, which expires on Thursday, fell to $40.40 a barrel indicating its lowest since March 2009. It also further dipped below $40 level in a volatile trading.
Minutes from the US Fed meeting indicated possible hike in interest rate. The US economy is reaching to a certain level, where it should take a decision to increase interest rates.
US Treasury yields too eased and the dollar slipped against the other major currencies. The US dollar is at three-week low of 123.78 yen. The euro rose to $1.1120. After witnessing continuous fall, gold is also moving up and trading at $1.1324 an ounce indicating one-month high.
All these factors are impacting the Chinese stock market and investors are nervous about the future direction of the market.
The possible rate hike, the drop in energy stocks prices, the slowdown in the global economy are the major concerning factors for Chinese investors. Chinese Shenzhen index too eased 0.75% on Thursday to 2205.31 points.
The Shenzhen dropped by over one percent during the past one month. Another major index HangSeng dropped 1.73% or 119.47 points and trading at 6781.41 points. The HangSeng index so far this month fell over 10%.