Chinese Stocks Slump Across the Board

Skyscrapers in Shanghai

Photo by Michael Bush for Thursday Review

Chinese Stocks Slump Across the Board
| published July 27, 2015 |

By Thursday Review staff

Market watchers and business analysts had hoped that China’s recent deep slump in stocks would have reached the bottom of the valley by mid-July. But on Monday, Chinese shares fell even further, losing some eight percent of their total value.

The losses for Chinese investors continue despite a variety of attempts by Beijing to halt the slide, including a government program which pumped billions of dollars of liquid cash into stocks. The Chinese stock market began its freefall in June, but reached what some had hoped was a point of stability and calm in early July after multiple interventions by Beijing. But worried investors—disheartened by the bursting of the equity and real estate bubbles—kick-started the selloff again in earnest on Monday, a slide which began from the first moments the markets were open for trading.

Among more than two thousand companies listed, only 77 survived the stock selloff, which was the worst single day of trading in China since 2007. The Shanghai Composite Index fell by 8.5 percent; the Shanghai and Shenzhen combined index of top companies fell by 8.6. Some companies fell even further, reaching the ten percent limit of downward movement (imposed by the government) and effectively halting trading of those stocks. Even the giant telecommunications and energy companies saw losses.

Not all is bad news, however, for Chinese investors. Some economists say that the markets in Asia, and in particular in China, were long overdue for a major correction. The earlier freefall—in late May and throughout much of June—gave other buyers an opportunity to buy up some stocks cheaply. That surge of bargain hunters may have created the brief period of stability. The new selloff may simply be those investors engaged in corrective selloffs to reap modest profits, leading some analysts to suggest that the Chinese markets will again stabilize this week.

But on the whole confidence has not fully returned to the Chinese markets. Many sober business analysts point out that the Chinese markets had experienced a rapid, exhilarating rise this year, right up to the point in June when investors began their stampede. Beijing had pumped money into the market to stabilize prices, and had also imposed strict limits of sales of stocks. Beijing also cut interest rates, and tweaked rules regarding pension plans and stock insurance. But with confidence damaged by what many now see as an over-inflated bubble, stocks could fall even further.

All told, some $4 trillion in value was lost during the heaviest periods of selloff since June. Economists will now watch to see if the markets begin to stabilize this week. The China selloff has been one of several hotspots of concern for Wall Street as it keeps an eye on some troubled overseas markets—such as Greece, where months of drama over its heavy debt ended in a tentative agreement for Greece to repay its loans and remain a part of the Euro Zone.

Related Thursday Review articles:

Cash-Strapped Greece Given New Deadline; Thursday Review staff; July 8, 2015.

Greek Default Could Have Wide Impact; Thursday Review staff; June 30, 2015.