“With the weaker China economy it’s very difficult to be optimistic on the Asian economies and currencies and we’re more concerned about the metal-exposed currencies,” said Magdalena Polan, head of emerging market macro research at PGIM Ltd.”
China’s economy was meant to drive a third of global economic growth this year, so its dramatic slowdown in recent months is sounding alarm bells across the world.
Policymakers are bracing for a hit to their economies as China’s imports of everything from construction materials to electronics slide. Construction equipment-maker, Caterpillar, says Chinese demand for machines used on building sites is worse than previously thought. U.S. President Joe Biden called the economic problems a “ticking time bomb.”
Global investors have already pulled more than $10 billion (¥1.4 trillion) from China’s stock markets, with most of the selling in blue chips. Goldman Sachs Group and Morgan Stanley have cut their targets for Chinese equities, with the former also warning of spillover risks to the rest of the region.
Asian economies are taking the biggest hit to their trade so far, along with countries in Africa. Japan reported its first drop in exports in more than two years in July after China cut back on purchases of cars and chips. Central bankers from South Korea and Thailand last week cited China’s weak recovery for downgrades to their growth forecasts.
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