Chinese stock sell off continues, threatening Australian confidence

• THE COURIER-MAIL
• JULY 28, 2015

Shanghai Composite has lost more than 10 per cent of its value in three days. 

CHINA’S stock market collapse continued on Tuesday, amid concerns heavy losses on the world’s second-biggest equity market will hurt confidence in Australia.The Shanghai Composite Index ended 1.68 per cent lower at 3663 after crashing 8.5 per cent on Monday.

The market has now lost more than a tenth of its value over the past three trading days, defying Government efforts to stem the slide.

The steep decline in the equity market of Australia’s biggest trading partner could threaten a nascent recovery in consumer confidence, some analysts say.The ANZ-Roy Morgan consumer confidence gauge rose 0.6 per cent in the past week, building on the 4.5 per cent recovery of the previous week, data showed on Tuesday.

CMC Markets chief market analyst Ric Spooner said the Chinese market collapse could have some impact on consumer confidence in Australia.

“Concerns about market volatility often show up in surveys of consumer confidence,” he said. But generally, Mr Spooner said, the stock market did not reflect the fundamentals of the Chinese economy.

“What you are seeing is the (Chinese) Government socialising the market by effectively buying out investors,” he said.

ANZ chief economist Warren Hogan expects the volatility will slow the Chinese economy a little. “The big question for the rest of the world including Australia is, is it going to slow down enough to have a negative impact here and we really won’t get a good gauge of that for a number of months,” he said on ABC-TV.

Australian shares closed slightly lower on Tuesday, avoiding any major fallout from China. The ASX 200 ended down 5.2 points, at 5584.7.

Fortescue Metals chairman Andrew Forrest said he was “not particularly” concerned by China’s share slide. “I’ve just had the opportunity to spend time with some very senior Chinese industrialists and they’re telling me the underlying economy could be stronger, but it is strong,” he said.

But QSuper chief executive Rosemary Vilgan, who helps manage $59 billion in funds, said she had been surprised at the extent to which the Chinese Government wanted to step in to stabilise the market.

QSuper’s Rosemary Vilgan

Chinese investors have traditionally relied on the Government to stabilise their market through a variety of measures, including ordering state-owned brokerages to buy shares. “It’s still very much in its infancy,” Ms Vilgan said after a Financial Services Council-Deloitte lunch on Tuesday. “The (rise of the) middle class in China is still in its infancy.” The fact QSuper did not invest in Chinese equities was a reflection of that infancy.