The Shanghai composite has closed down 8.5 percent in a brutal selloff, as Beijing’s measures have failed to ease investor concerns about the slowdown of the world's second-largest economy. China's stocks are now down for the year after being up 60 percent in June.
“This is a real disaster and it seems nothing can stop it,” Chen Gang, Shanghai-based chief investment officer at Heqitongyi Asset Management Co., told Bloomberg. “If we don’t cut holdings ourselves, the fund faces risk of forced closure. Many newly-started private funds suffered that recently. I hope we can survive.”
Asian markets followed China with a broad selloff.
Japan's Nikkei has closed 4.61 percent down. Hong Kong's Hang Seng is 5.17 percent in deficit. Mumbai's Sensex is down over 4 percent.
The ripple effects are being felt on the European markets.
London's FTSE is down 2.71 percent in early trading. Germany’s DAX is losing 2.66 percent, sliding below the 10,000-point mark for the first time since January, as of 09:23 GMT.
The European stock markets have continued last week’s negative trend, when 13 out of 18 Western European markets lost 10 percent or more, with Germany’s DAX down 18 percent. London's FTSE 100 Index suffered its biggest weekly drop in 2015, slumping 5.2 percent.
Commodities are down across the board with Brent crude trading below $44 per barrel, which is a six-and-a-half-year low.
On Friday, the US WTI crude benchmark dropped below $40 per barrel in an eighth straight weekly decline, the longest falling streak in almost 30 years.
The Russian ruble has fallen to its lowest level since February against major currencies, dragged down by both weak oil and Chinese stocks. The ruble was trading at over 71 rubles against the US dollar and 81.78 rubles against the euro as of 09:25 GMT.
The global market crash continued on Monday, starting with China and then continuing around the world.
Fresh from being slammed by more than 4% on Friday, a sell-off that took weekly losses to more than 10%, Chinese stocks were hammered yet again on Monday.
At the close the benchmark Shanghai Composite index fell 8.492% to 3,209.91, taking its losses from the multiyear peak of 5,178.2 hit on June 12 to 38%.
The Chinese media is dubbing the collapse "Black Monday."
Other markets in Asia also got hammered, with Hong Kong and Japan both falling 5%. Europe markets continued the rout, with most major indices down 2%-3% in early trading. And US DOW futures were down more than 400 points three hours before the market open.
China's Shanghai index is now trading at the lowest level since mid-March, and it has wiped out all of this year's gains.
At 8.49%, it was was the largest one-day percentage decline since February 27, 2007, slightly overshadowing the previous largest plunge of 8.48%, recorded on July 27.
It was also the sixth-largest percentage decline on record since daily down limits of 10% were introduced on December 16, 1996.
Still, adding some perspective to the recent losses, the index is still up 43% from levels of a year earlier.
Unsurprisingly, the carnage in Shanghai was replicated across other Chinese markets.
The CSI 300 and 500 indices, made up of the 300 and 500 largest firms by market capitalization in Shanghai and Shenzhen, fell by 8.75% and 7.97% respectively.
The Shenzhen Composite and ChiNext indices also closed down more than 7.5%.
The SSE 50, an index that contains the 50 largest stocks by market capitalization in Shanghai, fell by a jaw-dropping 9.35%.
Commodity prices are also nosediving.
US crude futures are down 3.19% at $39.16, the lowest level seen since the height of the global financial crisis.
Chinese iron ore, rebar, and coking coal futures are off by between 2.67% and 4.33%, while copper has lost an additional 1.56%.
Gold, having outperformed on the back of heightened market volatility on Friday, is trading lower. The spot price has lost 0.4% and now trades at $1,155.436 an ounce.
China’s state media called it “Black Monday” as the Chinese stock market recorded its biggest slump in eight years and jitters spread throughout Asia and the rest of the world.
The collapse in Chinese stocks was fueled by mounting concerns about an economic slowdown here, but it has fed into a wider sell-off in emerging markets. Asian shares hit a three-year low Monday, and the nervousness appeared likely to spread to Wall Street after last week’s sharp falls there.
“A lot of questions are being asked by investors,” said Chris Weston, chief markets strategist at IG in Melbourne. “This is a confidence game, and when you don’t have confidence, you press the sell button.”
Shanghai’s main share index closed down 8.49 percent, but trading in hundreds of shares was suspended after they lost 10 percent.
Overnight futures trading suggested further losses were in store for the Standard & Poor’s 500-stock index in the United States after last week’s 6 percent decline.
“Markets are panicking,” Takako Masai, head of research at Shinsei Bank in Tokyo, told the Reuters news agency. “Things are starting to look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable.”
“The pension fund signal didn’t work, which proves that investors have entirely lost confidence in the market,” said Wu Xianfeng, president of Longteng Asset Management in Shenzhen. “The market has been in a panic since last week.”
Weston said that after seven weeks of capital outflows from emerging markets, parallels were being drawn to the 1997 Asian financial crisis. But unlike 18 years ago, most countries in the region now have current account surpluses and significant foreign exchange reserves, he said.
“I think we will see stock markets continue to sell off, but we will get to a point where we do settle down,” he said, adding that the markets were looking for firm action by the authorities in China and the United States to stem the slide.
All eight of the major international stock indexes were down last week with an average loss of -6.57 percent, according to Doug Short, despite Friday’s -531 point plunge in the Dow Jones Industrial Average, driven by fears of an economic collapse in China. But this year China’s Shanghai Index is still up +8.44 percent and the U.S. S&P 500 Index is down only -4.27 percent. The nasty hit to investors last week could be just a correction in a five-year bull market. But if China is starting a currency war, investor pain could get intense.
By January 2000, the advanced Western Powers had prevailed over the Soviet Union, formed the European Union, and had entered what was being described as a transformational period of technological advancement. Yet the average stock market return for the group was a barely positive +.08 percent.
Investment performance on a percentage basis for the world’s biggest stock exchanges over the 15 year period was India +409; China +149; US +35; Hong Kong +29; Japan -2.3; Germany -3.2; UK -7.1; and France –22.
Those investment returns would have be substantially worse if adjusted for US inflation of +43.2 percent during the period.
China’s Shanghai exchange had been on a tear this year, up 59.72 percent by mid-June. But Breitbart News warned in a July Fourth article titled “China’s Lehman Brothers Weekend Begins,” that the “Red Dragon” was about to suffer the type negative tipping point event that the U.S. suffered in November 2008 that kicked off the financial crisis.
Despite the communist authorities’ $200 billion attempt to avoid a full-fledged crash over the next month, the Shanghai Exchange plunged by what was considered a gut-wrenching dive of -10 percent for the week ending July 31.
Breitbart News warned on July 27 in “China’s Communists Lose Control of Market” that the failure of the authorities to arrest the stock market crisis was metastasizing into a crisis of leadership that threatened the ability of Chinese state-owned-banks to continue Ponzi funding to insolvent state-owned-enterprises that power China’s export economy.
On August 1, China’s Communist Party went all-in with a $6 trillion back-stop of the Shanghai Exchange prices and $1 trillion of liquidity in an authoritarian attempt to stem the market crash.
Christine Lagarde, Managing Director of the International Monetary Fund, told a news conference the same morning that she saluted China’s massive central government intervention as preventing the “disorderly functioning” of markets. “That is the duty of central authorities,” she said. “The fact that they want to maintain a level of liquidity that is commensurate with an orderly process is quite good.”
Lagarde sought to reassure the financial community that at the IMF: “We believe that the Chinese economy is resilient and strong enough to withstand that kind of significant variation in the markets.” Based on the strong endorsement, the Shanghai exchange led all markets by rising +2.20 percent for the week of August 7 and +5.91 for August 14.
But Breitbart News warned on August 14 in an article titled “China Could Suffer $1 Trillion Foreign Capital Flight’ that China had already suffered $300 billion in capital flight in 2014. With the country beginning to devalue their currency we cautioned that another $1 trillion in foreign currency could flee China by the end of 2015 due to currency risks.
The Bank for International Settlement’s estimates U.S. dollar-based lending to companies and countries outside the U.S., mostly in emerging markets, has doubled to $9 trillion since 2009. Breitbart alerted readers, if China’s three percent devaluation started a currency war, the debt service cost of emerging market would skyrocket.
When rumors started last that huge emerging market investors like Blackrock, PIMCO and Templeton Funds were selling, stock markets around the world buckled, led down by China’s -11.57 percent loss.
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