It's the 2008 crisis all over again
Billionaire financier George Soros is warning of an impending
financial markets crisis as investors around the world were roiled by
turmoil in China trade for the second time this week.
Speaking at an economic forum in Colombo, he told an audience that
China is struggling to find a new growth model and its currency
devaluation is transferring problems to the rest of the world, according
to media. He added that a return to rising interest rates was proving
difficult for the developing world.
The current environment reminded him of the "crisis we had in 2008, a
leading weekly publication reported on Thursday. "China has a major
adjustment problem," he added, according to Bloomberg. "I would say it
amounts to a crisis."
China's CSI 300 tumbled more than seven percent in early trade
Thursday, again triggering the market's circuit breaker. As well as
roiling sentiment across Asia, it also battered European risk assets
with the German DAX down 3.5 percent at 11am, London time.
US stock index futures also indicated a sharply lower open as
investors focused on China's swooning currency and economic slowdown.
China, the biggest economic story of the last 30 years, has soured in
the eyes of many analysts. A stock market crash that began in the
country last summer has thrown up new difficulties. A raft of data has
disappointed in recent months as the country's leaders refocus the
economy on consumption from manufacturing.
Analysts also point to concerns over Chinese market regulators, who
they believe do not appear to have a good grasp of the market, even with
the introduction of the circuit breakers. In an attempt to stabilize
markets, China's securities regulator has issued new rules to restrict
the number of shares major shareholders in listed companies can sell
every three months to 1 percent.
Marc Ostwald, a strategist at ADM Investor Services, believes that
Soros' comments - alongside a gloomy report from the World Bank - only
serve to cast a "long shadow" over global markets.
"It should be noted that the current turmoil distinguishes itself
from 2008, when reckless lending, willful blindness to a mountain of
credit sector risks and feckless and irresponsible regulation and
supervision of markets were the causes of the crash, given that central
bank policies have been encouraged and been wholly responsible for the
current protracted bout of gross capital misallocation," he said, in a
About the author:
Matt Clinch is the Deputy Digital News Editor, CNBC.com