After Black Friday comes Black Monday for the Chinese stock market. On Monday August 24th, the Shanghai Composite Index dropped a staggering 8.5%, the biggest daily drop in eight years. Note that this index tracks all stocks listed on the Shanghai Stock Exchange, and every stock has a daily gain or loss limit of 10%.
The thing is, Monday’s drop wasn’t a sudden event, the Shanghai Composite Index has been tanking for a while now. In the past five trading days, the index plunged more than 20% from 3,994 to 3,209.9. Since its peak of 5,166 reached on June 12th, the index has plunged a staggering 37%!
Chart courtesy of www.StockCharts.com
Note that the above chart doesn’t include the 8.5% drop on Monday August 24th.
As of Monday, the Shanghai Composite Index has wiped out all its tremendous gains since the beginning of this year.
The situation looks equally bad on the other stock market in mainland China—the Shenzhen Stock Exchange. On Monday, the Shenzhen Composite Index lost 7.8%. ChiNext, a NASDAQ-style board on the Shenzhen Stock Exchange focusing on fast-growing innovative companies, lost 8.1%. Since its peak on June 12th, the Shenzhen Composite Index has plunged more than 40%!
Only fifteen stocks on both the Shanghai and the Shenzhen Stock Exchanges managed to rise on Monday. Nearly 2,200 stocks tanked the 10% daily limit. The only sector that got by shining was gold: Western Region Gold Co Ltd (601069.SS) surged 4.9% on Monday.
Sending Shockwaves Across the Globe
Global stock markets are entering sell-off mode after China’s stock market crash. As of 11:45 a.m. E.T., the Dow is down 2.4%; the NASDAQ is down 2.4%; and the S&P 500 is down 2.5%. In Europe, the FTSE 100 plunged 4.6%; the DAX dropped 5.0%; while the CAC 40 lost 5.7%. Hong Kong’s Hang Seng Index lost 5.2%. And Japan’s Nikkei 225 dropped 4.6%.