Global markets drop after Chinese stocks suffer biggest single-day plunge nearly a decade
Global shares did a nosedive on Monday after the Chinese stock market had its biggest plunge in eight years, despite the government's interventions.
The Chinese market's plunge threatened to affect the global market after Chinese losses last week sparked a worldwide sell-off. The Shanghai Composite Index dropped 8.5 percent in its largest single-day loss in eight years, according to an AP report published by Yahoo! News.
The last biggest decline happened on February 27, 2007. As of now, the Shanghai Composite Index has dropped 38 percent since it hit its peak level on June 12.
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On Monday, Hong Kong's Hang Seng index dropped 5.1 percent, while Japan's Nikkei fell 4.6 percent. Australia's S&P ASX/200 also decreased 4.1 percent, and South Korea's Kospi dropped 2.5 percent, America's Markets reports.
U.S. stocks were also affected, as the Nasdaq declined 4.5 perecent, the Dow slid 3.2 percent, and the S&P 500 was 2.9 percent lower.
European shares also suffered losses as Germany's DAX index slid 4.5 percent, Britain's FTSE 100 index lost 4.2 percent, and France's CAC 40 dropped 4.7 percent, the report adds.
Small investors have been among the most affected by the market plunge. The Communist Party had previously planned to use the stock market to raise funds for industrial reforms.
Pan Chong, an investor and social media specialist, said what happened on Monday seemed like the "end of the world" for him. He gained 40 percent from his CNY50,000 ($7,900) investment in April, but the money he made was wiped out by the market plunge. He is now mulling over the sale of his shares because he foresees that the bear market will stretch over a long period of time, the report details.
Last year, the Chinese benchmark rose over 150 percent after state media announced that the share prices were low. Millions of new investors who thought Beijing would jack up the prices when the need arises rushed to purchase shares.
However, the prices fluctuated and dropped after banking policies were altered in June. After a 30 percent drop in the market index, Beijing decided to stop shareholders from selling and offered state-owned brokerages that pension funds would purchase just to calm the market.
Still, Beijing's efforts were not enough. After an announcement that the state-run firm that is supposed to buy the shares would not intervene daily, the index dropped by 11.5 percent in the previous week.
Benjamin Collet, the Asian and Japan equities head at Hong Kong-based Sunrise brokers, predicts that global markets will follow the decline of China.
"How much of this is China's fault? Probably all of it," Collet said. "We attribute most of the gains to the epic rally in China, and now naturally I think it's reasonable to assume that investor sentiment is solely focused on China."
The yuan devaluation on August 11 did more to add to the anxiety of investors. This situation will most likely cause more money to exit China, the report says.
