Fresh fears over the Chinese stock market put world markets under pressure today.
Moves by the Chinese government to control the country’s booming stock market hit Wall Street and sparked a slump at the Dublin stock exchange with the ISEQ currently down 109.29 to 9810.53, a fall of 1.1%.
It has also prompted a sell-off among London’s leading firms, with the FTSE 100 down nearly 1% in early trading.
China’s main Shanghai Composite Index, which had hit record highs on Tuesday, saw sharp falls of more than 6% as the government trebled its “stamp tax” on stock trades in a bid to curb investor enthusiasm for the markets.
Barclays Wealth equities analyst Andy Penman said: “This sell-off has hit many sectors of the market today with western European markets all lower by around 0.5% to 1%.”
Today’s slump comes after former US Federal Reserve chairman Alan Greenspan warned that recent rises in Chinese share prices were “unsustainable” at a Madrid conference last week, causing market jitters.
Although the Chinese stock market is smaller than most major exchanges, increasing numbers of businesses around the world now operate in China as the country fuels its rapid economic rise with skills and materials from overseas.
The country’s rapid growth – GDP rose 10.7% last year – has raised fears of a bubble developing that could burst in dramatic fashion.
But Dominic Rossi, head of global equities at Threadneedle Investments, described the sell-off as a “knee-jerk reaction”.
He said: “Markets have had a good run but there is a lot of nervousness. This is a reaction to a policy change rather than the economic fundamentals.
“There is a lot of hedge fund money being invested and they don’t want to be last out of the door so they all head for the exit at the same time.”
Concerns over Chinese stock collapse have already added to bouts of uncertainty in global markets this year.
The Footsie wobbled in February on fears that the Chinese government would try to cool economic growth by raising interest rates or reducing the money available for lending.
Mr Greenspan also added to the market woes at the time by voicing predictions of a recession in the US – the world’s biggest economy – by the end of the year.