should re bound tomorrow

Chinese whispers: stock shock


Colin Kruger
February 28, 2007 - 4:05PM

Traders react to the negative economic news on the floor of the New York Stock Exchange after the Dow Jones Industrial Average fell more than 500 points.

Chinese authorities may have doused tax rumours that triggered a global share rout over the past 24 hours, but it was not enough to mend the damage to Australia's share market.

Despite recovering some ground from the 3.5 per cent plunge this morning, the All Ordinaries and ASX 200 were still 2.6 per cent lower at 3.55pm.

This equates to a market loss of around $35 billion in Australia, and much more worldwide in what has been the market's worst day since the terrorist attacks on September 11, 2001.

Chinese regulators today denied rumours of plans for a 20 per cent capital gains tax on stock investments as share prices recovered modestly this afternoon following their worst plunge in a decade.

About an hour after trading began, the Shanghai Composite Index was up 1.2 per cent to 2,804.28 after opening down 1.3 per cent.

Yesterday, it tumbled 8.8 per cent, its largest decline since February 18, 1997.

Yesterday's "sell-off does not reflect any fundamental change in the outlook for China's economy'', Yiping Huang and other Citigroup economists said in a report released today.

"A sharp contraction in excess liquidity that would reinforce damage in the stock market remains unlikely,'' it said.

The New Zealand Stock Exchange - the first in the world to open and close - finished 1.5 per cent down today after staging a recovery following an early slump.

The benchmark index of top 50 companies plunged more than three per cent soon after opening in the wake of falls on international bourses after Chinese stocks fell nine per cent with the biggest losses in a decade yesterday.

Australia's major indices fell by more than 3 per cent when the markets opened this morning.

Australia's All Ordinaries Index plunged by 212 points to 5773 at the 10.15am open today, wiping about $45 billion from the value of the Australian stockmarket.