Chinese market wipes €2.4bn off Irish shares

Some €2.4 billion was wiped off the value of shares listed on the Iseq in Dublin on Thursday on a day when global stock markets wobbled amid concerns that growth in China is slowing more than previously forecast.

European stocks fell for the third time in four days as they extended the worst start to a year since 2000. Some £33 billion (€44 billion) was wiped off the FTSE 100 index in London after China allowed its currency to weaken faster than before. The Dow Jones was down 2.3 per cent to 16,520.48 in afternoon trading.

The Stoxx Europe 600 Index was down 2.2 per cent at the close of trading. In Dublin, the Iseq Overall Index closed down 1.85 per cent at 6,563.78 while Germany’s DAX Index lost 2.3 per cent to hit 9,979.85, trading below 10,000 for the first time since October.

Worst hit

France’s CAC 40 Index, the UK’s FTSE 100 Index and Switzerland’s SMI Index all lost at least 1.7 per cent. Among Irish shares, the worst hit were building materials group

CRH

, which saw €600 million wiped off its market value, low cost airline

Ryanair

, which shed €700 million,

Bank of Ireland

, which lost €200 million of its value, and Cavan-based

Kingspan

, which had €100 million of its value wiped out.

The commodity-heavy FTSE 100 sank to a three-week low as UK mining and energy shares hit their lowest level in more than 11 years, with metal and crude oil prices knocked by concerns that major consumer China’s economy is even weaker than anticipated.Major market indices in the United States were down about 2 per cent in mid-afternoon trading.

Earlier, Chinese stocks had plunged more than 7 per cent, forcing officials for the second time this week to halt trading for the day. The fear is that China’s economy, the world’s second-largest after the US’s, is slowing down and affecting growth in other countries.

“People are worried about whether they are using currency depreciation to stimulate growth,” said Steven Sun, head of China strategy and Hong Kong and China equity research at HSBC. “At the end of the day, the question is, Do they have control? Everyone is asking that question.”

Joe Gill, director of corporate broking at Goodbody Stockbrokers, said the international profile of many companies listed on the Irish market meant they would not be immune to global concerns over the Chinese economy, weak oil prices and economic difficulties in emerging markets.

“It’s inevitable because the Irish market is made up of many companies with an exposure to the global economy and so they suffer when there’s a wider sell-off in markets.”

Earnings multiples

He said there were also concerns over earnings multiples after a couple of years of a bull run in equities.

Eugene Kiernan, head of investment strategy at Appian Asset Management, said a problem for investors is that it is "so difficult to analyse what's going on" in the Chinese economy at present and the "stop-start" nature of actions by the authorities there.

“It’s not like trying to analyse the Fed [US Federal Reserve] because it’s quite opaque,” adding that it was difficult to assess if there is a fundamental problem with the economy in China.

Noel O'Halloran, chief investment officer at Kleinwort Benson Investors in Dublin was sanguine about China's economy, predicting growth this year of 6.5 to 7 per cent. "It's market noise rather than anything fundamental going on," he said.

– (Additional reporting by Bloomberg and Reuters)