Wellington - China’s fifth interest-rate cut since November failed to put a floor under global markets, with stocks outside Japan sliding and commodities dropping.
The Shanghai Composite Index headed south again, having plunged more than 20 percent in the previous four days. Futures on equities in the US, where the Standard & Poor’s 500 Index erased a gain of 2.9 percent in the final hour of trading, followed. Gold and oil reversed early gains and copper led a retreat in industrial metals. Malaysia’s ringgit weakened to a 17-year low.
“The prevailing sentiment is still that investors want to cash out whatever the government does,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong. “Confidence is already damaged. Doubts over the effectiveness of policies are getting bigger. The market will remain under selling pressure for a while.”
Chinese stocks endured their worst four-day rout since 1996 as the government removes unprecedented support for equities to focus on shoring up economic growth. Concern that policy makers are struggling to prevent a hard landing in the world’s second- largest economy has convulsed global markets, triggering a rush from all but the safest of assets.
The MSCI Asia Pacific excluding Japan Index fell 0.6 percent by 10:50 a.m. in Hong Kong, where a gauge of Chinese companies fluctuated after erasing an early loss.
Margin debt
The Shanghai Composite fell as much as 3.9 percent. Outstanding margin loans on the Shanghai and Shenzhen exchanges fell to about 1.25 trillion yuan on Monday from a record high of 2.27 trillion yuan on June 18. The Shanghai Composite Index has plunged 45 percent from its June peak
The yuan slipped 0.2 percent after the People’s Bank of China set the rate around which it can trade at 6.4043, the weakest since 2011. Liquidity has tightened as the central bank buys yuan to stabilize the exchange rate following the currency’s shock devaluation two weeks ago.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, declined seven basis points to 2.47 percent, data compiled by Bloomberg shows. That’s the biggest drop since June 30.
Australia’s S&P/ASX 200 Index dropped 0.5 percent, while Singapore’s Straits Times Index slid 0.8 percent to take losses since an April peak to 19 percent.
Japan’s Topix index advanced 1.3 percent as the yen weakened a second day. The currency weakened to 119.11 per dollar. The yen jumped the most in four years amid surging haven demand on Monday.
The ringgit fell as much as 2.5 percent, touching levels not seen since July 1998. Abu Dhabi’s International Petroleum Investment Co. may pull out of a plan to help restructure 1Malaysia Development Bhd.’s $3.5 billion of debt, Singapore’s Business Times reported Wednesday citing an unidentified person.
The Bloomberg Commodity Index sank back toward a 16-year low struck Monday as gold for immediate delivery slid 0.3 percent to $1,137.82 an ounce. Copper for three-month delivery slipped 1 percent to $5,013 a metric ton in London as nickel sank 0.7 percent and zinc and aluminum lost at least 0.9 percent.
* With assistance from Yuko Takeo in Tokyo
BLOOMBERG