China’s financial fortune cookie looks as if it may be in danger of being smashed to smithereens as investors worldwide dump equities.
China’s financial fortune cookie looks as if it may be in danger of being smashed to smithereens.
That’s the message that the market is sending out at least as investors dump equities, not just in China but worldwide.
‘Black Monday’ at the start of this week, when stocks in Shanghai slumped 8.5%, was followed at the time of writing today (Tuesday August 25) by another steep slide of 7.6%. It was the worst plunge in eight years.
Markets elsewhere followed suit. On Monday the pound lost value against the euro as currency markets swung wildly while the FTSE-100 lost £74bn in value in one of the worst days for equities since 2008, the year that Lehman’s went down.
Among retailers, Burberry has been an obvious casualty. From a year-high of 1921p, it is trading at the moment at about 1341p.
But the disruption is not limited to those retailers with direct exposure to China.
Tesco’s sale of its South Korean business, Homeplus, could be affected.
The decline of the Korean won against sterling, on the back of Chinese turmoil, could affect the firepower of potential buyers, so Tesco will be keen to proceed with a deal as fast as possible.
The big question is how long the turmoil in China might last.
The hope is that it will blow over like a typhoon on the South China Sea.
The fear is that the fortune cookies are running out.
If that were the case, the effect would be felt in the UK where, for some retailers, high-spending Chinese visitors are vital to trade.