http://www.theaustralian.news.com.au/story/0,20867,21300723-601,00.html
Stocks shed $30 billion as China rocks investors a.. Scott Murdoch b.. February 28, 2007 THE Australian market has fallen almost 3.5 per cent from near-record highs in early trading after Wall Street suffered its biggest fall since the September 11, 2001 terror attacks. The fall in the value of Australian equities has wiped more than $30 billion off the market's capitalisation. The selldown this morning was prompted by the plunge on the Chinese market last night, driven by a regulatory shake up in lending practices by the major banks. The reaction was immediate across the world as European markets were shaved by about 2 per cent across the bourses. Once Wall Street trading opened, the Dow Jones index was down by 500 points at one stage. The futures market pointed heavily towards a red-letter day on the Australian market but the reaction has surprised some market observers. The Australian market plunged by 206 points on the open - the greatest one day fall since the September 11, 2001 terrorist attacks. The S&P/ASX200 has made up some ground during the day though, with some analysts judging the weakness to be a buying opportunity. Shortly after midday the index was trading off 152 points - showing that almost 50 points of the initial fall has been regained. The All Ordinaries Index was at 5823.8. The worldwide ripple is the first caused directly by changes on the Chinese equities market. Financial forecasters are now analysing whether it could be the start of a long-term trend from one of the last remaining major communist states. TD Securities chief strategist Stephen Koukoulas said despite the downturn, the market was still well-above historical averages. Even despite the sell-off today, the market is trading at the same levels it was at the end of January. "This is 3 per cent - the market is up 100 per cent in the past year three years," Mr Koukoulas said. "It does matter ,but the end game really will be whether this is a slowing down in China ... if it is then commodity prices will be affected, we could have slower GDP, weaker profit growth." The government has moved to allay fears among investors, as Australia has the largest private share ownership level in the world. Prime Minister John Howard said investors should not be spooked by the move, while Treasurer Peter Costello said the fundamentals were still firmly in place. However, he said the move showed how vulnerable Australia could be to external financial shocks. The $A has moved lower today, primarily on the back of a weaker $US. The global market falls were triggered by a massive 8.8 per cent sell-off on the Shanghai stockmarket on Tuesday, it's biggest one-day fall in 10 years. The fall in the Chinese stock exchange followed a switch in sentiment, with investors appearing to finally heed warnings from regulators that stock prices were vastly overvalued. Earlier on Wall Street, the Dow index tumbled 416.02 points (3.29 per cent) to close at 12,216.24 after plummeting as many as 540 points moments earlier in a highly volatile session marking the worst day on Wall Street since 2001. The main blue-chip index plunged some 250 points in a matter of minutes in late afternoon deals, a move analysts attributed to computerised program trades. The tech-heavy Nasdaq composite sank 96.65 points (3.86 per cent) to 2,407.87 and the broad-market Standard and Poor's 500 index lost 50.33 points (3.47 per cent) to finish at 1,399.04. Analysts at Briefing.com called the action "one of the worst days for stocks in recent memory." "The sell-off in China continues to have a profound effect on stocks across the board, since the largest unwinding in the Shanghai Composite Index since 1997 leaves investors questioning the sustainability of stock gains everywhere," the analysts said in a note to clients. Asia was dragged down by a dive in the Shanghai stock market, Wall Street slumped, and the main European indices showed falls of between 2 and 3 per cent on average at the close. Metal and mining stocks were particularly hard hit because of concerns about demand from China, which has been the driving force behind record prices for raw materials in recent years. Comments from former Federal Reserve chairman Alan Greenspan and rising tension about Iran's nuclear program also served to undermine investor confidence. Greenspan had warned yesterday that the US economy had been expanding since 2001 and that there were signs that the current economic cycle was coming to an end. Eugene Peroni at Claymore Securities said there was "a mild panic, maybe a climactic event," that triggered the sharp market declines. He said the sudden drop in later afternoon trading probably came from computerised sell programs that automatically kick in at certain price levels and added that "there could have been some hedge funds involved." "This could have prompted some urgent selling for those on the wrong side of the market," he added. "It has the earmarks of program selling.'' Peroni said however that the US selloff may have brought the long-awaited "correction'' to Wall Street, which observers say is often needed to take some of the speculative fervor out of the market. "I think this will be beneficial for the long term," he said. "But I don't think it will be a one-day wonder. It will continue over the short run and there will be some aftertremors. There will be a period through the end of March where we may see a saw-tooth pattern to the market." - with agencies [Non-text portions of this message have been removed] ------------------------ Yahoo! Groups Sponsor --------------------~--> Great things are happening at Yahoo! Groups. See the new email design. http://us.click.yahoo.com/lOt0.A/hOaOAA/yQLSAA/uTGrlB/TM --------------------------------------------------------------------~-> Post message: [EMAIL PROTECTED] Subscribe : [EMAIL PROTECTED] Unsubscribe : [EMAIL PROTECTED] List owner : [EMAIL PROTECTED] Homepage : http://proletar.8m.com/ Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/proletar/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/proletar/join (Yahoo! 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