On Monday, the Chinese stocks plunge over eight percent as an extraordinary government rescue plan to prop up the valuations suddenly out of the steam. This decision was made by the government in order to throw the viability of Beijing’s efforts to stave a deeper crash into the doubt.
The Chinese markets experienced their largest one day drop ever since the year 2007. This came breaking three weeks of relative calm in the volatile stock markets of China since Beijing unleashed a bombardment of support measures that were to arrest a slouch that started in mid-June.
The analysts at Capital Economics stated in a research note reacting to this that the lesson from China’s last equity bubble is that as soon as the sentiment has soured, the policy interventions aimed at shoring the prices having a short lived effect.
The CSI300 index of the biggest listed companies in Shenzhen and Shanghai fell to 8.6 percent that is to 3,818.73 points while the Shanghai Composite Index plunged to 8.5 percent that is 3,725.56 points.
China’s market twists have strengthened fears among the global investors about the broader health of the second biggest economy of the world. This resulted in hitting prices of the growth sensitive commodities like copper that took a plunge on Monday. This price is not too far away from a six-year low.
The Chinese stocks plunge over the board on Monday with 2,247 companies witnessing a plunge, leaving only 77 as gainers. Over 1,500 shares listed in Shenzhen and Shanghai plunged by almost 10 percent of their daily limit that is led by the heavyweights such as China Unicom, PetroChina and Bank of Communications.
The analysts struggled to explain the rigorousness of this situation that accelerated steeply in the afternoon session after the investors had time to grasp the latest economic releases.
The markets opened down over 2 percent after the lackluster data on the profits at the industrial firms in China. However, the Chinese stock investors have been rejoicing the bad economic news for several months as it will provoke an aggressive policy easing that is seen as positive for stocks as it pushes the cheap money to the market.
Notably, the main stock indexes of China almost doubled since a year to mid-June, when there was a sudden drop in the shares by over 30 percent in just a few weeks. The share markets have recovered by around 15 percent from early July till Monday.
