Global stock managers are preparing for a bad patch amid concerns that a dramatic slowdown in China will affect the future of companies elsewhere that rely on the world's second largest economy.
China-linked investments have turned into a disaster, with the risk that the property market slump could turn into a systemic crisis. So far, the sell-off has been concentrated in Chinese stocks. On the other hand, pressure is mounting on stocks in Europe, the United States and other parts of Asia, whose business is affected by demand in China.
Caterpillar Inc. and Dupont de Nemours Inc. are among the companies sounding the alarm with their latest earnings releases. With China's growth forecast downgraded, investors are trying to de-risk their portfolios.
An MSCI index tracking global companies with the most trade ties to China has fallen nearly 10 percent this month. That's double the decline in a broader gauge of world stocks.
Jason Hsu, chief investment officer at Rayliant Global Advisors, said: "Clearly, the whole world is inextricably tied to China. Large global firms are either selling to China or sourcing from China. These firms are going to have to revise their revenues from China downward over the next 12 months."