Savers suffer as shares lose £40billion in China panic

SAVERS were left reeling as nearly £40billion was wiped off the value of leading UK firms yesterday after fears over China’s slowing economy sparked panic on world stock markets.

The FTSE 100 index fell 2.4 per cent on the new year’s first trading day, after China’s stock market plunged by 7 per cent.

It was London’s worst opening day, apart from 2000’s 3.8 per cent fall when the dotcom bubble burst.

The FTSE rout was a bleak start to 2016 for savers with money in pensions and investments linked to the stock market and blue-chip shares such as Bp, Vodafone and HSBC.

It also added uncertainty to the financial plans of companies, as well as hitting households tempted to invest in shares instead of relying on the dismal interest rates offered by banks.

Calum Bennie, a savings expert at Scottish Friendly, said: ‘It’s unlikely that savers will be receiving good news on i nterest rates any time soon.’

The Bank of England has frozen rates at 0.5 per cent since March 2009 and the index has fallen more than 14 per cent since hitting an all-time high in April last year, wiping £260billion off pensions and investments.

The slump in China caused Tokyo’s Nikkei to lose 3.1 per cent, before the stock market in Frankfurt tumbled 4.3 per cent while on Wall Street the Dow Jones Industrial Average fell more than 2.5 per cent early on.

Jason Hollands, of investment company Tilney Bestinvest, said there was ‘ a sea of red’ on traders’ screens worldwide: ‘It’s been a bruising start to the New Year – 2016 is likely to be a volatile year.’ Experts said the slump would particularly hurt workers near or in retirement who need to sell shares now – but they urged others who will not take their pension for years yet to ‘keep investing and don’t panic’.

Tom Mcphail, head of retirement policy at Hargreaves Lansdown, said: ‘For anyone still building up a pension ... today’s market movements may prove to be a blessing in disguise. This is an opportunity to buy investments at a lower price.’

The Footsie had dropped 4.9 per cent during 2015, in the worst year for investors since 2011, and it fell 148.89 points to 6093.43 yesterday – cutting the value of blue- chip firms by £38.4billion on a brutal day for investors.

Nigel Green, of advisers deVere Group, said i nvestors have started the year ‘in panic mode’.

He added: ‘Volatility is likely to rip through financial markets in the first half of 2016.

‘There’s a cocktail of uncertainty ... including China’s economic woes, higher interest rates in the US, historically low oil prices, Britain’s referendum on exiting the EU and increasing tensions in the Middle East.’

Joshua Mahony, analyst at trading firm IG, said: ‘If markets abide by the mantra of starting as you mean to go on, we could be in for a seriously messy 2016.’

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‘A seriously messy 2016’

All but two stocks on the FTSE 100 index slid lower yesterday after China saw heavy selling.

China’s blue-chip CSI300 index fell 7 per cent. Gu Yongtao, a strategist at Cinda Securities, said: ‘This is quite unexpected. It was a stampede.’

Trading was suspended under new ‘circuit breaker’ rules to curb market volatility if shares fall too far.

Disappointing data showed factory output in China fell for a tenth month in a row in December – fuelling fears for the world’s second largest economy – and the renminbi currency hit its lowest level in nearly five years.

Analysts said Chinese firms may dump shares when a ban on large-scale sales ends on Friday.

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