Shangai tanks 5%: Will global mkts see new lows?

The much feared Chinese asset bubble burst has finally happened. China's Shanghai Composite plunged 5% led by fall in property and steel shares. Indian and other Asian markets...

China's Shanghai Composite on Wednesday plunged 5% led by fall in property and steel shares. The Indian and other Asian markets mirrored this fall.
Moreover, the Chinese government also cut gasoline prices from today by CNY 220/ ton. Shares of China Petroleum & Chemical and PetroChina fell in Hong Kong after this unexpected cut. Sinopec slipped 3% while PetroChina lost 2%.

So, is this just an aberration or a precursor to a major correction across global markets? Experts delve deeper.
Kirby Daley, Senior Strategist at Newedge Group said that the effects of the Chinese market fall would not be a short-term affair. He fears that the global market would see lower lows again. “Emerging markets had gotten ahead of themselves with more inflows from foreign money which could prove to be hot in another risk aversion run and also in general there has been a pricing in of a sustainable commodity rally based on recovery of consumption by the end consumer which I don’t believe is there. I think emerging markets will be hurt when that reality is factored back in.”
Dariusz Kowalczyk, Chief Investment Strategist, SJS Market, said that the plunge in the Shanghai market today was driven by the fact that valuations had gotten ahead of fundamentals. “Some large investors decided that it is time to take profits.” The fall would definitely impact other markets. “Most global indices around the world will finish above current levels by the end of this year. Some emerging markets may actually still decline towards December and I would count both China and India. India I think will finish at 15,000.”
Andy Xie, Independent Economist said that China needed to understand the risks associated with its current policy. It is releasing liquidity to stimulate the economy, but unlike, the US which had a financial crisis, there was no similar situation in China and so, the liquidity doesn’t come out of the financial system. “What is going on in China is over-stimulating the financial markets. The impact on the real economy is limited. So, China might be doing what the US did during the subprime crisis. So, I think China needs to be careful. It should not go overboard in trying to do what the US has done.”