Tokyo, August 12, 2015: Asian stocks started sinking from Wednesday as China let its currency fall for a second day following a suddenÂ devaluation that madeÂ global financial markets worried. China’s government said that as aÂ part of reforms meant to make its exchange rate more market-oriented, the devaluation of the yuan was needed. Pulling shares and prices of oil and other commodities sharply lower, the decision raisedÂ worries over the health of the world’s second-largest economy.
Angus Nicholson, a market analyst at IG, said that the markets were not expecting any major moves on the currency from the Chinese government, despite its benefits, as the risks were perceived as too high. Now that this Rubicon has been crossed, keen attention should be paid to any other significant moves to prop up the Chinese economy.
Keeping Score: After Tuesday’s nearly 2 percent slide down, the Chinese yuan’s market rate fell 1.6 percent and was marked as the biggest drop in a decade. Japan’s Nikkei 225 slided down by 1.8 percent to 20,342.78 and Hong Kong’s Hang Seng fell 1.2 percent to 24,068.29. South Korea’s Kospi lost 1.9 percent to 1,949.36 and Australia’s S&P/ASX 200 slipped 1.8 percent to 5,374.20. The shares in Southeast Asia were also lower and Shanghai Composite Index fell 0.5 percent to 3,910.30.
China’S Devaluation:Â Many investors recognizedÂ it as an attempt to accelerateÂ a slowing economy but the International Monetary Fund welcomed Beijing’s move toward more flexible exchange rates. Export of China will be more price competitive overseas as a consequence of cheaper yuan. On the other hand,Â the devaluation causedÂ selling of shares, oil and other commodities on expectations of weaker demand from China.
Wall Street:Â On Tuesday, the Standard & Poor’s 500 droppedÂ 20.11 points, or 1 percent, to 2,084.07 . The Dow Jones industrial average lost 212.33 points, or 1.2 percent, to 17,402.84. By 65.01 points, or 1.3 percent, to 5,036.79 ,the Nasdaq composite index dropped.
Energy: On the New York Mercantile Exchange, U.S. crude dropped byÂ 17 cents to $42.90 a barrel in electronic trading. Losing $1.88 to $43.08 a barrel, it fell Tuesday to its lowest minimum level in six years. As further evidence of a global excess supply,Â OPEC also announced that its production increased to a 3-year high . AÂ benchmark for international oils used by many U.S. refineries, Brent crude, dropped 28 cents to $48.90. To close at $49.18 in London, it fell $1.23.