Asian Markets Fall on Prediction that China Growth May Slow
Today's news that the Conference Board, a New York-based research organization, now predicts that China's economic growth will slow considerably caused a massive sell-off in Shanghai. According to Bloomberg BusinessWeek, "China's growth acceleration has passed its peak." The firm reports that according to its index of economic indicators China grew 0.3% in April -- far less than the 1.7% gain recorded for June.
Additionally, European businesses are becoming less optimistic about their own investments in China. According to a study conducted by the EU Chamber of Commerce in China, Chinese regulation of foreign companies is tightening, reports Bloomberg. This could make the allure of doing business in China fade for some. Of those surveyed, 39% , think the government will institute new policies making it even less fair for foreign companies over the next two years.
Among the top complaints, the survey showed that the government is more enthusiastic about enforcing environmental regulations when it comes to foreign companies as opposed to local Chinese companies. Foreign businesses have long perceived they were discriminated against in certain areas. In 2009, for example, the EU Chamber of Commerce president claimed that foreign companies were excluded from the bidding on a $7 billion package to manufacture 25 wind turbines, according to the International Centre for Trade and Sustainable Development.
Today commodity producers nosedived. Jiangxi Copper plunged 7%, Zijin Mining tumbled 6.4%, and Aluminum Corp. of China, otherwise known as Chalco, and Pingdingshan Tianan Coal Mining both slumped 4.9%.
Chinese real estate companies were among the worst performers with Gemdale plunging 9.9%, Poly Real Estate sinking 7.1% and China Vanke sliding 3.9%.
Fear of a slowdown in China sent Hong Kong shares spiraling. Banks closed lower with Bank of Communications falling 4.6%, Industrial & Commercial Bank diving 2.6%, Bank of China losing 2.5% and HSBC, the most heavily weighted banking stock on the Hang Seng, down 2.1%.
Wharf Holdings, which operates a multitude of businesses from real estate properties and shopping malls to cable tv and ferry lines, sank 4.1% and Hutchison Whampoa, which also runs a variety of businesses including ports, factories and investment services, dipped 2.7%.
Li & Fung, the clothing and toy distribution giant, tumbled 5.1% and Esprit lost 2.5%.
In Japan, companies that export to China followed the trend. Hitachi Construction Machinery dropped 2.2% and Komatsu fell 1.3%. Both sell major construction machinery like excavators and bulldozers, which have been in high demand lately in China. Taiheiyo Cement dropped 2.5% and Okuma, which makes industrial tools, lost 1.9%.
Electronics exporters had a tough day with Pioneer, the audio-video company, sinking 4.3%, Casio Computer slumping 3.8%, Canon falling 2.7% and Panasonic losing 1.7%. Gaming companies weathered the storm, managing small gains: Nintendo inched up 0.3% and Sony added 0.2%.
But even Fanuc, the industrial robot company poised to take over in Chinese factories where human workers may be pricing themselves out of jobs, declined 2.2% today. All eyes are certainly on China these days, and one small wave can take the markets by storm.