Asian Markets: China’s Stock Market Rout Drags Down Tokyo Shares

China’s stock market rout continued Tuesday, as the main Shanghai Composite Index slumped 7.7 percent, following the previous day’s fall of almost 8.5 percent. The continuing decline also dragged down shares in Tokyo, where the Nikkei closed almost 4 percent lower, though other Asia Pacific markets rose.

A roller-coaster day on the Chinese markets saw stocks slump, rebound and then plunge again, as an injection of more than $23 billion of funds into the market by the Chinese authorities failed to calm market sentiment.

The Shanghai Composite Index finished more than 244 points down at 2,962 — the first time since the early stages of its boom last December that it had closed below the 3,000 mark. The secondary Shenzhen Composite Index also fell more than 7 percent, while Shenzhen’s Nasdaq-like market for small and high-tech enterprises, the ChiNext index, finished 7.5 percent lower.

Rattled by these falls, Tokyo’s Nikkei reversed a morning rise of more than 1 percent to fall sharply in afternoon trading. Hong Kong’s Hang Seng Index also fell sharply in early afternoon trading, before recovering to close 0.7 percent higher at 21,404.

Analysts said Chinese investors were disappointed that, despite Tuesday’s short-term injection of government funds, the authorities had still not taken the widely predicted step of lowering the bank reserve requirement ratio. This would not only make borrowing cheaper and thus provide a boost to industrial firms, which have been hit by slumping export orders, but was also hoped for as an important psychological symbol that the authorities still intended to intervene to boost the market.

“From the macro-economic point of view a cut in the reserve requirement ratio is needed, to reduce the high funding and borrowing costs for Chinese firms,” Li-Gang Liu, chief economist for Greater China at ANZ Banking Corp. in Hong Kong, told International Business Times. However, he said it appeared that the authorities “perhaps don’t want to cut the rate when there is such a big market rout,” for fear that “this type of policy easing would be seen as an action of weakness.”

Liu also suggested that China’s central bank, the People’s Bank of China, now has other important policy objectives to focus on, “such as encouraging more structural changes and reform” in China’s economy, and therefore keeping the bank lending rate high “could be good for firms to rebalance. I think they’re feeling that lower capacity firms should be driven out of the market, rather than using a low interest rate to help them out.”

And there is a growing sense that the Chinese government may have decided that it can no longer continue the massive injection of government money that helped prop up the stock market when it slumped in July. Angus Nicholson of IG markets in Sydney believes that the authorities decided at a key leadership meeting earlier this month that daily interventions were “costing the government too much money,” the Guardian reported Tuesday.

Certainly some Chinese investors are no longer expecting major government support, of the type which saw state-backed funds invest in a massive buying spree in the first half of July. One veteran Shanghai-based investor, who asked not to be named, told International Business Times that he quit the market when it began to fall from its peak of over 5,000 points in June, and is not planning to buy in again. He said he believed the authorities had “used up most of their ammunition” to prop up the market, and that they would now focus more on issues such as China’s exchange rate, as evidenced by this month’s devaluation of the yuan.

Such an approach appears to undermine the government’s hopes of using the stock markets to raise capital to fund the modernization of the country’s economy. However, the official Global Times newspaper said in a commentary Tuesday that what it called “unusual short-term jitters” would not change the fact that China’s economy was still “one of the best” in the world. The paper also quoted a Chinese academic who said that “market-oriented” reforms of the financial markets, including steps to reduce government interference in which companies are allowed to list, would still go ahead.

And ANZ’s Liu said that while there are real concerns about the slowdown in China’s growth, and what he saw as relatively slow policy reaction to the situation, he did not believe that China’s stock market – which is notoriously volatile, and still remains some 50 percent higher than its level of just over a year ago – should continue to pull global share prices down, even if it continues to fall.

“The Chinese equity market is still very much self-contained,” he said. “It’s not directly connected with the rest of the world other than Hong Kong – and the foreign players are quite small and not very influential.”

Liu added that Tuesday’s rise on bourses, including Australia’s, where the ASX200 index closed 2.4 percent higher, showed that “there was some panic yesterday and the markets have oversold. Now I think we’re probably seeing some kind of a rethink on these more mature markets.”

BT I

Line for Android updated with big focus on low-cost calling

Line, Japan’s popular mobile messaging app that has been struggling to grow beyond its home turf, today released an updated Android app (version 5.4.0) with a new focus on low-cost calling.

The service now known as Line Out, which lets users make calls to mobiles and landlines anywhere in the world “at competitive rates” from inside the app, has been rebranded from Line Premium Call.

The company also wrote on its blog that the calling feature has been given a “major overhaul to make it easier than ever to use”, so the move to a simpler and more memorable name makes sense. Line Out will likely sound familiar to anyone who has used Skype’s similar feature (previously called SkypeOut).

The update is likely part of a wider push by the company to appeal to a broader international user base after its Q2 earnings report at the end of July revealed it was struggling to grow outside Japan. Its revenues were also down quarter-on-quarter for the first time.

The company is likely looking to grow its paying phone calling customers — many existing users already have credit cards linked to their accounts — it could take some of the pressure off its other revenue channels. Line currently makes most of its money through stickers ($75 million in its first year) and in-app purchases within its gaming titles.

Line Out has also been given more prominence within the app, now available as a “Calls” tab from the main horizontal menu bar alongside the tabs Friends, Chats, and Timeline.

But the calling out experience still isn’t integrated entirely smoothly. Because users will oftentimes be calling friends or contacts on their mobile or landline who are not Line themselves, there is some manual setting up required to make it all work.

From within settings, you will have to “sync up friends’ phone numbers registered inside your phone’s contacts to make easy and low-cost calls to friends who aren’t using Line yet.” For Line users who have already added phone numbers to their profiles, obviously this additional step won’t be required. But then when free voice calls are available within the app over an Internet connection, it seems unlikely that many Line Out calls will be made to existing Line contacts.

A built-in keypad is also accessible through an icon at the top right of the app’s home screen for users who want to dial a number “the old-fashioned way.”

While this update in and of itself may not seem especially notable, it is likely to be the first of many in what will emerge as a wider attempt to offer paid services that attract international users, and that help Line to differentiate itself from more successful competitors like WhatsApp.

As further evidence of its continued push into new markets, earlier this month the company launched a ‘Lite’ version of its mobile messaging app globally (clearly aimed at users who don’t enjoy such fast speeds and generous data consumption as in Japan), as well as a new app that lets friends share their current locations in real time.

VB

Dow plunges after rollercoaster trading on ‘Black Monday’ for global markets

Hundreds of billions of dollars were wiped off global stocks on Monday as a panic that started in China spread across the world.

The Dow Jones Industrial average lost 586 points, or 3.56%, a fall of more than 13% from its record high reached in May. When the markets opened the Dow plunged 1,089 points – the index’s largest ever intra-day decline – before staging a slight recovery. After reaching that record high just three months ago, August is on track to be the Dow’s worst month since February 2009.

The S&P 500 and Nasdaq also closed down – the latter at a seven-month low. Markets in most of the rest of the world suffered some of the biggest one-day falls so far this year.

The drop was so dramatic that the White House issued a statement reassuring worried investors that the US economy would be better able to withstand a China-induced slowdown in the global economy than it had been in 2008, when the collapse of Lehman Brothers lead to a near-meltdown of the global banking system.

“There is no doubt the global economy is more interconnected that it ever has been,” Josh Earnest, Barack Obama’s chief spokesman, said. “What I would encourage people to evaluate is the ongoing strength and resilience of the US economy.”

Nick Kounis, head of financial markets research at investment bank ABN Amro, said: “The potent and self-re-enforcing cocktail of worries about China, emerging markets and commodities has triggered a global rout in equity markets. Against this background all eyes are now on the Chinese authorities. We think they will deliver with further monetary easing sooner rather than later.”

TG