Equities around the world took a big tumble on Tuesday as growing evidence of a prolonged slowdown in China possibly spilling over to other parts of the globe rattled investors. Christine Lagarde, the head of the International Monetary Fund (IMF), on Tuesday warned global growth would be weaker than previously expected and that emerging economies should be alert to potential shockwaves from China’s slowdown.
Lagarde fears ‘bumpy’ ride and warned global growth could be weaker than hoped, as China’s manufacturing shrinks at fastest rate since 2012. The IMF chief told an audience in Indonesia that Asian economies could continue to lose momentum following recent turmoil on global markets, which have been shaken by fears over China’s economic outlook.
Indian stocks fell more than 2% as foreign institutions continued to pull money out of the market;they have sold in 21 of the last 26 sessions. Bloomberg data showed that PSU banks saw their valuations dip to new lows.
On the back of a 4.5% fall in the CNX PSU Bank index, the price-to-book-value ratio (PBV) of the index declined to its lowest since February 2013.The Sensex ended to its lowest level in more than one year closing 25696.44, down 586.65 points or 2.23%.
In Asia, Japanese main stock average – the Nikkei 225 – ended down nearly 4% after data showed Japanese investments in new plant and equipment dropped because of concerns about demand from China.
Shares in mainland China fell 1.3%. In Hong Kong, stocks fell more than 2% after Chinese manufacturing showed further signs of weakness, adding to evidence of a massive slowdown in the world’s second biggest economy. Stocks in other Asian economies like South Korea, Indonesia, Singapore, Taiwan, and Thailand fell 1-2% each.
Major European indices were down 2-3% following the double-whammy from slowdown in China’s and Europe’s manufacturing growth. Manufacturing PMI growth in major western Europe such as Spain, Germany, Italy, Austria, France, Netherlands, Ireland, and Greece fell to multi-month lows. US futures were down 2%, extending losses in what is the worst months since 2012.