The Shanghai Composite Index closed down 6.1 percent on Tuesday in its biggest daily decline since July 27, denting hopes that Chinese share markets are starting to stabilize after Beijing’s efforts since last month to stem their rout.
Shares of importers and firms with high U.S. dollar-denominated debt have been under pressure following last week’s yuan devaluation.
Even though the weaker yuan is not going to stop altogether China’s outbound march, the devaluation will affect the capacity of some suitors to fully engage in a bidding war.
For instance, buyers Anbang and Fosun, which are looking to buy Portugal’s Novo Banco, may lose some edge to outbid rivals in the deal, estimated at more than $4.4 billion.
“Anbang and Fosun have made binding offers, so the sale is not compromised by the devaluation,” said a bank analyst in Lisbon, who was not authorized to speak publicly on the matter. “What it might affect is their capacity to sweeten the bids further.”
Despite initial global markets jitters, China’s central bank appears to have put a floor under the yuan and the move could help the economy down the road, improving the outlook for deals.
“If anything, it probably provides a measure of confidence the government is using different levers to stabilize the situation and make China more competitive,” said Oliver Stratton at consultancy firm Alvarez & Marsal.
Concerns about slowing demand for commodities from China also hit copper prices CMCU3, which slid to a six-year low of $4,983 a tonne, breaking the psychological $5,000 level. It last stood at $5,018.50 a tonne.
That in turn knocked down copper exporters, with the Chilean peso sinking to 12-year lows CLP=.
A number of emerging market currencies are facing capital outflows also as investors shift funds to the dollar, whose interest rates look set to rise.
U.S. oil futures prices CLc1, which hit a 6 1/2-year low on Friday, rebounded on short-covering ahead of Thursday’s expiry of the key front-month contract.
They stood at $42.36 per barrel, off Friday’s low of $41.35.
That also helped to Brent LCOc1, the London-traded global benchmark for oil, snap a three-day decline on Tuesday.
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