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NZ sharemarket falls amid global jitters
The New Zealand sharemarket has started the new trading year on the back foot.
A
trader works on the floor of the New York Stock Exchange. Photo: AFP
5
January, 2016,
Updated at 11:25 am today,NZT
The
benchmark NZX-50 index opened down about 40 points, or 0.7 percent,
in the first few minutes of trading.
It
extended the losses and at 10.40am was down 1.2 percent, or 78 points
at 6246.
The
fall followed a rout on global share markets, with American and most
European markets closing down more than two percent recorded larger loses.
The
current volatility has been triggered by a sharp slide in China,
where weak manufacturing data renewed fears about the health of the
world's second biggest economy.
Falls
on the local market outnumber the rises by more than three to one,
with almost all of the leading stocks losing more than 1 percent.
The
drop in the local market is being exaggerated by low numbers of
shares being traded.
Some
investors will also likely be taking profits after the New Zealand
market's record-breaking run last year.
Sharp
falls in China prompted a trading halt on the main stock markets,
after indexes tumbled 7 percent.
A
survey indicating China's manufacturing sector contracted again last
month was blamed for the falls.
Other
Asian markets also fell, while in Europe the FTSE 100 sank 2 percent
and Germany's Dax index dropped 3.8 percent.
Meanwhile,
news that Saudi Arabia had broken off diplomatic ties with Iran sent
oil and gold prices higher.
On
Wall Street, all 10 major S&P sectors were lower, led by the 2.4
percent fall in the technology sector. Bank stocks were also hard
hit, with Goldman Sachs down 3.2 percent.
"Those
are violent New Year fireworks, Janlyn Capital managing director
Andre Bakhos said. "That's quite a way to start the day off."
A
Chinese investor looks at prices of shares (green for price falling)
at a stock brokerage house in Hangzhou city. Photo: AFP
Earlier
on Monday, trading on China's Shanghai and Shenzhen stock exchanges
was halted for the first time under new "circuit breaker"
rules, which are designed to curb market volatility.
The
share price falls came after more signs of trouble in the world's
second-largest economy.
The
Caixin/Markit purchasing managers' index slipped to 48.2 in December,
marking the 10th consecutive month of shrinking factory activity in
the sector. A reading below 50 indicated contraction.
Some
analysts also attributed the decline in share prices to the imminent
end of a six-month lockup period on share sales by major
institutional investors, a policy implemented to shore up indexes.
Big shareholders may start dumping shares once the ban is lifted on
Friday.
Huang
Cengdong, an analyst for Sinolink Securities in Shanghai, said: "The
market will not improve because there will be heavy selling in the
near future."
Monday's
sell-off in China had a knock-on across the region. Japan's Nikkei
225 tumbled 3.1 percent and Hong Kong's Hang Seng retreated 2.6
percent.
"Welcome
to 2016, though you'd be forgiven for thinking the markets were back
in August 2015 with China causing some early New Year issues,"
said Spreadex analyst Connor Campbell.
And
Alastair McCaig, market analyst at IG, said: "Anyone hitting the
trading floor expecting a calm and quiet start to 2016 was given a
rude surprise as Asian chaos affected European markets."
Markets
were also rattled by growing tensions between Middle East powerhouses
Saudi Arabia and Iran over the execution of Shia cleric Nimr al-Nimr.
The
execution in Saudi Arabia led to protests in Tehran. Saudi has cut
diplomatic ties with Iran and given diplomats 48 hours to leave.
Iran's
supreme leader has warned Saudi Arabia it would face "quick
consequences" for the execution.
-
BBC
Stock
Markets Fall As China Halts Trading
A
new "circuit breaker" halts share dealings in China,
prompting other world markets including the FTSE 100 to plunge
sharply
4
January, 2016
Stock
markets have reacted nervously after trading on China's Shanghai and
Shenzhen indices was halted early on Monday when shares plunged by
about 7%.
The
Shanghai Composite Index fell to its lowest level in nearly three
months, on what was the first trading day of 2016.
An
earlier 15-minute break in trading, when shares had fallen by more
than 5%, failed to stem the slump.
The
FTSE 100 in London lost 2.4% in response - wiping roughly £38bn off
its value - in what proved a jittery session across Asia, Europe and
the US.
Germany's
DAX shed 4.3%.
It
was the first time a new "circuit breaker" system -
designed to curb volatility in Chinese stock markets - was triggered,
with trading ending 90 minutes earlier than the usual close.
Monday's
decline was among the biggest the Shanghai market has endured
Poor
Chinese manufacturing data was a factor behind the falls in China.
An
independent report released early on Monday suggested that factory
activity in China had been contracting for 10 consecutive months as
of December.
Spectacular
aerial view of city from Shanghai Tower, Shanghai, China - 30 Aug
2013
Escalating
tensions in the Middle East, sparked by Saudi Arabia's execution of a
prominent Shia cleric over the weekend, also led to a jump in oil and
gold prices.
Financial
analysts are particularly concerned about how the Chinese market will
react when measures designed to enhance stock market stability expire
in the coming days.
At
the start of July, major shareholders in Chinese companies were
banned from selling their stakes for six months.
China Day 1: Monumental Destruction
4
January, 2016
China's Shanghai
Composite index was stopped down nearly 7% on the first
trading day of the new year. This
is worse than 99.6% of all trading days since
the beginning of 2007 (a monstrous era covering the entire
market turmoil of the global financial crisis).
To put
some risk context behind
how poor a ~7% drop is -in relation to the worst losses over
different time (not just relative to all daily changes)- we look at
a variety of
time units. This is different from the market convolution
math discussed previously (here, here). For
example, today’s loss in China is worse than 93% of
the worst
daily losses per month,
since 2007. We see this in the chart immediately
below. And in the chart further below that, we see today’s
loss is worse than 67% of
the worst
daily losses per year.
Lastly, in that same chart, we show China’s first day loss is
worse than even the
majority of
the worst
weekly losses per year! This conservative
measure substantiates that on just a single day, the losses stemming
from China has breached most of
the worst
risk levels that
would normally take a complete week to get through.
And
we see in the chart above that today's loss in China is worse than
the worst daily loss coming out of 100 out of the past 108 months
(only the 3 months where the worst daily loss was rounded to 0% have
been truncated from the chart above)! In fact, as shown in
the blue portion
of the chart, there have only been 4 months since mid-2008, where
the worst
daily loss that month was
worse than today's loss. Those
2015 months are: January, June, July, and August.
We
see in the jittery chart above (third column), that today's loss is
worse than the worst
daily loss coming
out of 6 of the past 9 years (hence the 67%).
And in the middle column we see today's loss is worse than the worst
weekly loss coming
out of 5 of the past 9 years (or the majority)! This statistic
provides a powerful segue with our prequel
article on
the worst weekly loss distributions. Finally in the first
column we see that today's loss is worse than the worst
monthly loss coming
out of even 2 of the past 9 years.
The
main takeaways from this article is that market shocks can be quite
quick, when they suddenly unravel. There
is no need for markets to follow an
observable pattern (therefore
casting an omen just for you). Recall as well that this is just
"day 1"! There
are ~20 additional dramatic trading days ahead this month, where
anything can precipitously take place.
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