Singapore (Business Emerge), October 9: The Chinese stock market faced its steepest daily drop since the COVID-19 pandemic, with the Shanghai index and blue-chip stocks plummeting 6.6% and 7.1%, respectively. This abrupt decline marked the end of a 10-day winning streak for China’s surging markets, which suddenly turned fragile. The commodity sector, including oil and metals, followed suit with downward pressure after China’s National Development and Reform Commission’s recent press conference failed to introduce any new significant stimulus measures.
On the global front, the MSCI world equity index, tracking shares across 47 nations, dipped by 0.2%. Despite this, European markets managed slight gains of 0.1%, with sectors like utilities, healthcare, and real estate standing out as safe investments amidst the uncertainty.
Markets now turn their focus to an upcoming Saturday announcement by China’s finance ministry. Investors are anticipating more comprehensive fiscal stimulus to rejuvenate economic growth. Expectations range between a spending boost of 2 to 10 trillion yuan (approximately $280 billion to $1.4 trillion). For the stimulus to be effective, it would need to add at least 2 percentage points to China’s GDP, according to Nick Ferres, chief investment officer at Vantage Point Asset Management.
Optimism remains in some quarters, particularly for domestic investors, who are encouraged by the stronger performance of local stocks. Alexandre Marquis, a senior portfolio manager at Unigestion, noted that the improving domestic stock market is a positive signal for foreign investors, indicating that the stimulus may indeed provide a boost to China’s economy.
However, commodities remain vulnerable to China’s uncertain economic outlook, reflecting the broader market sentiment.