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The damage spans the globe.
Thailand's baht. Kazakhstan's tenge. South Africa's rand. Peru's nuevo sol.
In emerging markets worldwide, currencies are plunging over fears that developing economies are on the verge of a crippling fall. Success stories until recently, emerging economies are seen as casualties now - of slower growth in China, plunging prices for commodities such as oil and iron ore, the prospect of higher US interest rates and homegrown threats.
The damage has spilled across oceans, with the turmoil jolting investors in New York, Tokyo and Europe. Investors there worry that China and other major emerging economies will reduce their imports.
READ MORE: From Asia to Wall Street: China’s stock market meltdown goes global in one of the worst trading days for eight years

They also fear a trade-disrupting currency war as some countries desperately lower their currencies' value to gain a competitive edge. A lower-priced currency makes a country's goods cheaper for foreigners.
Yesterday regional stock markets plunged after China's main index sank 8.5 per cent - its biggest drop since the early days of the global financial crisis - amid deepening fears over the health of the world's second-largest economy.
Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe.
The Dow Jones industrials tumbled over 1,000 points or 6 per cent at one point yesterday, compared with Friday's trading when it fell 2.4 per cent. So far, it's down more than 6.5 per cent in the past month. Tokyo's Nikkei index shed 4.6 per cent yesterday.
For all the market jitters, many economists say they remain confident that the US economy is resilient enough to withstand a slowdown in the developing world. And Europe's economy appears to be emerging from its long slump.
Even so, the trouble in emerging markets is a surprising and unsettling reversal.
READ MORE: China Markets Live - Early calls, price forecasts and analyst views
"It's remarkable just how things turned around so quickly," says Neil Shearing, an economist at Capital Economics and a former British Treasury official.
Consider Peru. Three years ago, its capital, Lima, hosted an International Monetary Fund meeting of global finance officials in what was seen as a celebration of Latin America's arrival in the economic big leagues.
But with the event six weeks away, Latin America's outlook has descended from boom to gloom. Peru's economy has steadily slowed, and its currency, the nuevo sol, has fallen 2.5 per cent against the US dollar in the past month.
And Peru boasts one of the region's healthiest economies. Brazil's economy is expected to shrink this year and next. Its currency, the real, is down 7 per cent in the past month and more than 30 percent in the past two years.
Kazakhstan's currency plummeted this week after the government decided to let it trade freely. The South African rand fell this week to a 14-year low against the US dollar. Turkey's lira hit a record low against the dollar this week.
Hung Tran, an executive managing director at the Institute of International Finance, expects developing countries to post 3.8 per cent economic growth this year, down from 4.3 per cent in 2014. The institute is on the verge of cutting that forecast further.
Analysts point to a primary culprit:
"It's all coming from China," says Masamichi Adachi, an economist with JP Morgan Chase in Tokyo. "Brazil, South Africa, many countries are commodity exporters, and the final destination is all going to China."
The Chinese economy is slowing more sharply than most people had expected from the double-digit growth rates of the mid-2000s. The world's second-biggest economy is expected to grow 7 per cent this year, which would be its slowest pace since 1990.
Beijing is trying to manage a transition from rapid growth based on exports and often-wasteful spending on factories, real estate and infrastructure to slower, steadier expansion based on consumer spending.
That transition means China would need fewer raw materials - Chilean copper, Nigerian oil, Brazilian iron ore.
That helps explain why China's pullback has loosed carnage in global commodity prices: the Standard & Poor's GSCI commodity index, which tracks 24 commodities prices, is down nearly 20 percent this year.
Emerging markets were already feeling the squeeze last week, when China devalued its currency, the yuan. That step ignited a semi-panic.
"The devaluation is a red flag about China's current economic situation," said Kurt Braybrook, who runs a Shanghai company that does quality control work. A falling yuan raises the risk that other countries will devalue their currencies to catch up.
Most countries can't blame China and the vagaries of the global commodities market for all their problems.
South Africa is battling labour strife. Brazil is contending with a corruption scandal at state-owned oil giant Petrobras. Turkey is struggling to form a government while its military battles the Islamic State extremist group and Kurdish separatists.
Adding to the pressure: America's Federal Reserve is expected, perhaps at its September meeting, to raise the short-term rate it controls from near-zero.
Investors could respond by moving even more money out of emerging markets to seek higher US rates.
That would lift the dollar higher and push emerging market currencies even lower.
A Fed rate hike could also squeeze emerging market companies that have borrowed in US dollars. Those companies would struggle to accumulate enough local currency to pay their nowmore expensive dollar-denominated debt.
Tran at the Institute for International Finance said dollar borrowing by emerging market companies surged from US$700 billion in 2010 to US$2 trillion through March.
The rising dollar and the hoard of dollar loans recall the 1997-1998 Asian financial crisis. Back then, a currency sell-off triggered an emerging market debt crisis that became a disaster for countries such as Indonesia and South Korea.
But the picture is less alarming now, analysts say. For one thing, developing countries have stockpiled foreign reserves that they can use to buy their own currencies and stop a crisis.
What's more, emerging market companies that borrowed in dollars in recent years tended to take out longer-term loans, notes Joaquin Cottani, Standard & Poor's chief economist for Latin America.
During the '97-'98 crisis, companies had taken out short-term loans and couldn't refinance when the loans became due during a panic.

Burnt by market turn
Wen Xiaofan, 35, chemical engineer at a state-owned research centre
I sold all my shares last week. I have mixed feelings: on the one hand, I feel lucky to have escaped this Black Monday; on the other, I empathise with other investors and have lost confidence in the stock market. I bought many shares early this year and sold the bulk of them in July. When the index rallied, I couldn't resist the low prices and bought some shares, but their prices soon dropped further and I hated myself for the bad move. Last week, I emptied my portfolio because the prices were down to my "psychological limit". The market will be bearish for a year, I think, and I won't invest in it within this period. Overall, my investment return rate is 20 to 30 per cent. But it's quite exhausting having to watch the market closely every day. It's better to just deposit your money in the banks.
 
Zhang Qingying, 68, retiree in Shanghai
I invested more than 200,000 yuan (HK$242,000) in buying funds and shares early this year and now they are valued at just thousands of yuan. I am almost insane. I've been investing in the stock market for two decades and I think the market has cost not only my entire life savings, but also my life. The market is more malicious than thieves. I can sleep for only two hours each night and often wake up in a panic. I lead a frugal life and am just an ordinary person, not a corrupt official. It wasn't easy for my family to accumulate this amount of money. We've lost so much in the market that my son says he wants to kill himself. I tried to persuade him otherwise by saying there is still hope as long as we're alive. But honestly, I don't have any more confidence in the market and the authorities. The market slide is strongly related to the government, which misled the public. In March when the index rallied, People's Daily said it was still "halfway up the hill". Not long ago, China Securities Regulatory Commission chairman Xiao Gang said the authorities had the "ability, willingness and resources" to save the market. Encouraged by the news, we stuck it out in the market over the past month instead of fleeing. I think these messages from the government amount to killing us. Do the authorities mean to swindle our money?
 
Cui Huaiman, 56, worker at a state institution
The consecutive days of drops in the stock market have confused me. Perhaps it's linked to the overall bearish international market. More possibly, it's because of too much malicious short-selling by domestic brokerages. I select shares carefully based on their business revenue, profits and industry outlook. For instance, I bought shares of CRRC Corporation, the rail transit equipment maker. I believed it was a promising share given that it dominated the market and state leaders even promoted it when visiting other countries. But today, its shares dropped to the 10 per cent limit. I don't know why. Half of my investments in the market have evaporated. But I feel at peace and am optimistic. It's a good thing that the government intervened in the market last month and this action means the authorities care about the interests of us people. The government has done its best and we, stock investors, can't blame the authorities. I think the stock market is full of risks. It's uncertain whether you'll win or lose. It's like playing a card game.
 
Wang Qiang, 30, Shanghai public servant
I am a veteran stock investor and I read the business news every day. When the index was about 4,300-4,600 points months ago, I sold two-thirds of my shares since those were shares of start-up companies and they were overvalued in my opinion. The remaining one-third of my shares are mostly blue chips and I intend to hold them for the long term. Prices of some shares in my portfolio are higher than the price at which I bought them two to three years ago, and I think they will surge further. The recent market plunge is caused by the bubble bursting and the shrinking size of margin lending. I opposed the central authorities' measures last month to intervene in the market. With those measures, the government has few cards left in its hands if the market encounters more serious issues. I am not confident about the market and I think there is a low chance the index will rebound unless the government adopts more aggressive policies.
Alice Yan


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Focus

China's slowdown has spooked investors but can lessons from previous crises help calm prevail?

Currencies, commodities, even gold: nothing is safe in the current selling frenzy in emerging markets worldwide. Photo: Reuters

Currencies, commodities, even gold: nothing is safe in the current selling frenzy in emerging markets worldwide. Photo: AFP

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China's slowdown has spooked investors, but lessons from previous crises could help calm prevail


In emerging markets worldwide, currencies are plunging over fears that developing economies are on the verge of a crippling fall. Success stories until recently, emerging economies are seen as casualties now - of slower growth in China, plunging prices for commodities such as oil and iron ore, the prospect of higher US interest rates and homegrown threats.


China's slowdown has spooked investors but can lessons from previous crises help calm prevail?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}China's slowdown has spooked investors, but lessons from previous crises could help calm prevail

China's slowdown has spooked investors, but lessons from previous crises could help calm prevail