Shares of importers and firms with high U.S. dollar-denominated debt have been under pressure following last week’s yuan devaluation.
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Yuan positions at China’s central bank and financial institutions fell by the most on record in July, a sign capital outflows picked up and the central bank stepped up intervention to support the yuan.
China’s securities regulator said late last week that the market had normalised and the government would allow market forces to play a bigger role in determining stock prices.
ANALYST’S TAKE: “Market fear is growing”.
US housing starts rose to a near eight-year high in July as builders ramped up construction of single-family homes, supporting the case for a rate hike.
China’s main Shanghai stock index slumped more than 4 percent on Wednesday, leading Asian stock markets lower a day after a sharp fall rattled investors around the world.
The S&P/TSX composite index was down 49.83 points at 14,201.70, an improvement from a triple-digit drop earlier in the morning that followed a major decline in China’s Shanghai stock market.
“Investors ran for the exit when the government failed to step in to support the market”, said Steve Wang, the chief China economist at Reorient Financial Markets Ltd.in Hong Kong.
But spreadbetters expected better sentiment in Europe, with Germany’s DAX, Britain’s FTSE and France’s CAC 40 all seen up 0.3%. Hong Kong’s Hang Seng Index dropped 1%.
While some analysts have said a rocky stock market, down almost a quarter from its June peak, would encourage investors to put their money back into real estate, they caution that a prolonged rout could end up hurting the economy.
Oil prices down near six-year lows also bit into the markets of the region’s export-reliant economies.
For investors with a longer-term horizon, sticking with Chinese shares could prove “very lucrative” because the country’s economic growth is still stronger than many of its peers, according to Gerry Alfonso, a sales trader at Shenwan Hongyuan Group in Shanghai.
Falling demand in the world’s top consumer of industrial metals and energy – and the prospect of an impending US interest rate hike – pushed Bloomberg’s commodity index to its lowest level since 2002.
Speculation the Fed will soon raise its key rate for the first time in nearly a decade has strengthened the dollar, while concerns the fall in the yuan could spark a currency war has dragged on many Asia-Pacific currencies. The tech store’s share price was down 16.5% to the lowest point since it floated in 2013.
CURRENCIES: The U.S. dollar weakened to 124.300 yen from 124.391 yen while the euro strengthened to $1.107 from $1.103.
Brent crude oil was down 0.4% at $48.57 in Asia trade, putting it down about 6% so far this month.
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US benchmark West Texas Intermediate for September delivery was down 12 cents to $41.75 in afternoon trade.
