Chinese Stocks Suffer Second Biggest Crash In History, 1,500 Companies Halted Limit Down


This was not supposed to happen.

After pledging, investing and otherwise guaranteeing the Chinese stock market to the tune of 10% of GDP, and intervening on at least 40 different occasions in the past month ever since China’s stock bubble burst in late June, with the subsequent crash nearly taking the Shanghai Composite red for the year, overnight China officially lost control for the second time, when after a weak start to the Monday trading session, things turned very ugly in the last hour, when the Shanghai Composite plunged by 8.48%, closing nearly at the lows, and tumbling some 345 points for its biggest one-day drop since February 2007 and its second biggest crash in history!

 

 

The selling was steady throughout the day, but spiked in the last hour on concerns China would rein in its market-supporting programs following IMF demands to normalize its relentless market intervention. According to Bloomberg’s Richard Breslow: “fear that the extraordinary support measures employed to hold up the market may be scaled back caused heavy afternoon selling resulting in a down 8.5% day.” Of course, one can come up with any number of theories to explain the plunge: for example the PBOC did not buy enough to offset the relentless selling.

 

The last thing the communist party and the PBOC wanted was another massive sell off after having not only fired the “bazooka” but come up with a different bazooka to halt “malicious sellers” virtually every day, including threats of arrest.

 

Nobody was spared in the selloff and of the 1,114 stocks in the Shanghai Composite, 13 closed higher on Monday.

Here, courtesy of the WSJ, are some of the more amazing numbers of today’s selloff:

  • The Shanghai Composite Index ended down 8.5% at 3725.56, its second-straight day of losses and worst daily percentage fall since February 27, 2007. The smaller Shenzhen Composite fell 7% to 2160.09 and the ChiNext, composed of small-cap stocks and sometimes known as China’s Nasdaq,  closed 7.4% lower at 2683.45.
  • More than two-thirds of the stocks in the Shanghai Composite, or about 765 companies, hit their down limit on Monday. Those limits prevented hundreds of stocks from logging sharper declines, though they can also make it harder for investors to exit positions.
  • Since the Shanghai Composite peaked in June, it has lost 28% of its value. Massive intervention by authorities in Beijing engineered a
    rebound for the country’s stock markets earlier this month, but Monday’s selloff eroded much of that recovery.
  • Although hundreds of stocks have resumed trading since the market bottomed earlier this month,126 stocks on the Shanghai Composite are still halted.
  • International investors have been ditching Chinese stocks for the past few weeks, spooked by widespread share suspensions that locked up capital. Investors sold stocks during 13 of the past 16 trading sessions via the Shanghai-Hong Kong Stock Connect, a trading link connecting the two cities that launched in November. Cumulative outflows now total 39.9 billion yuan, or U.S. $6.43 billion.
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