Shanghai's stock market plunged on Friday close to its summer low after factory data indicated manufacturing was contracting in August. File Photo by Stephen Shaver/UPI
SHANGHAI, Aug. 21 (UPI) -- China's Shanghai Composite Index fell 11.5 percent this week, sending the market closer to its lowest point after a massive stock selloff this summer led to state intervention in the markets – and a currency devaluation shook financial markets in the region.
The selloff came on Friday after new numbers were released, indicating China's factory activity had fallen to a six-and-a-half year low, The Wall Street Journal reported. China's main stock index subsequently fell by 4.3 percent to close at 3507.74, just slightly higher than a summer low recorded on July 8.
The decline and symptoms of China's economic slowdown affected other markets in China and the region. The Shenzhen index closed 5.4 percent lower on Friday, and Hong Kong's Hang Seng shed 1.5 percent after losing all net gains for the year this week, The New York Times reported. In Tokyo, the Nikkei 224 closed down 3 percent.
China is not the only economic giant facing growth woes – Russia and Brazil also have registered slower growth or are showing early symptoms of a recession.
The factory numbers from China indicated the country's manufacturing sector shrunk in the first three weeks of August at the fastest rate since the global financial crisis. The Caixin purchasing managers' index scored 47.1 points for August, lower than 47.8 points in July. The number was the lowest reading since March 2009, and any figure below 50 indicates contraction.
The news of contraction in China hurt European investors on Friday, The Guardian reported.
"As it stands, the FTSE 100 is on course to post its biggest weekly decline of the year so far, and there's not a great deal on the agenda that would appear to have the ability to salvage the situation before the weekend break," he said.
China's recent devaluation of its currency, the yuan, has sent shock waves across global financial markets and fears the world's No. 2 economy is at the risk of a hard landing.
Angus Nicholson at IG Markets in Sydney told The Guardian, "Global markets are in panic mode as the full scale of China's slowdown becomes clearer."
Nicholson said the potential for further currency devaluation in China makes it unlikely the United States plans to go forward with an interest rate hike in September.
