Mini-crash in Chinese tech stocks hides bigger picture for mainland markets

Two summers after a major Chinese stock market crash, Monday’s stock tumble points to how much steadier the mainland markets have become.

Nearly 500 stocks on the small-cap ChiNext index plunged before hitting the 10 percent lower limit, according to Reuters. The technology-heavy index dropped 5.1 percent to close at its lowest since Jan. 16, 2015, according to FactSet. Some news outlets deemed it a “Black Monday” for Chinese stocks.

However, broader indexes containing stocks of bigger companies fared relatively better. The Shanghai composite fell 1.4 percent, marking its worst day since Dec. 12, while the CSI 300 fell 1.1 percent in its worst day since June 14. Hong Kong’s Hang Seng index closed slightly higher.

It was enough to remind people how much markets have changed since the summer of 2015, when the Shanghai and Shenzhen stock indexes crashed more than 40 percent, resulting in hundreds of stock trading suspensions. Chinese regulators also heavily intervened in the stock market by preventing major shareholders from selling and reportedly creating a group of stock buyers to support the market.

In the year-and-a-half since, China has replaced its stock market regulator and emphasized financial market stability. Stock index company MSCI also gave the mainland stocks a vote of confidence in June when it announced some of the largest mainland stocks would join its benchmark emerging markets index. Disappointment from MSCI’s earlier rejection of those stocks in June 2015 also contributed to the market selloff that summer.

“This is nothing like in 2015 anymore. Back then, leadership was legitimately panicked,” said Chris Beddor, associate, Asia, for consulting firm…

Read the full article from the Source…

Back to Top