THE Australian share market is a sea of red this afternoon after the Chinese share market was suspended for the second time this week.
Mining and energy stocks were already being sold off in earlier trading amid lower prices for iron ore and oil and concerns over a slowdown in the Chinese economy.
But the selling intensified after trading on the Shanghai and Shenzhen stock exchanges in China was frozen for the day after shares tumbled more than 7 per cent.
Chinese markets were temporarily suspended on Monday for the same reason. That caused a rout on share markets globally.
Shortly before 3pm, Australia’s benchmark share index, the ASX 200, was down 2 per cent.
It takes losses this week beyond 5 per cent, with almost $80 billion stripped from the value of the market.
Shares in mining titan BHP Billiton are down more than 4 per cent, and Rio Tinto is nearly 4 per cent lower.
South 32 had slumped by more than 6 per cent mid afternoon, and iron ore pure-play Fortescue Metals was down by more than 5 per cent.
Oil stocks were also getting hammered, with Woodside Petroleum nearly 3 per cent weaker, and Santos off by well over 6 per cent.
CMC Markets chief market strategist Michael McCarthy said the suspension of the Chinese market for a second time was clearly making things worse for mining and energy stocks.
“I don’t think it should, but I’d have to say yes. Looking at the way these things have occurred together and how the situation has worsened after that closure (in Chine) — yes,” Mr McCarthy said.
The Chinese share market is increasingly being perceived as a barometer for the Chinese economy.
But seasoned market observers say the volatile Chinese share market does not necessarily reflect the state of the Chinese economy.
“It’s always true that the stock market is not the economy, and the economy is not the stock market,” Mr McCarthy said.
“But it’s even more particularly true in China where we get a lot of official intervention in the market, and we also are restricted in who can access that market.
“So while it is not to be ignored, it is not signalling that growth in China will slump to three per cent this year.” Mr McCarthy said the pace of the investor retreat appeared to be driven by fear, given the belting that the market has copped all week.
AAP
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