Monday, August 24, 2015

"Black Monday"

The Daily Mail reports:
Chinese stocks plummeted in a ‘Black Monday’ crash that saw the worst day of trading since the start of the global financial crisis eight years ago.

A dramatic fall today has sent the global market into panic, on the heels of last week’s serious losses.

The Shanghai index crashed more than 8 per cent in morning trading, effectively shedding all its previous gains for the year.

The fall has spanned every corner of the market in China, the world’s second largest economy, with small-cap growth stocks and state-owned blue chips dropping at roughly the same rate.

‘Markets are panicking,’ said Takako Masai, the head of research at Shinsei Bank in Tokyo.

‘Things are starting to look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable.’

Even a last ditch attempt to rescue the market by introducing investment from pension funds failed to limit the serious losses as investors continue to flee the equity market.

* * *
Losses seemed to be limited only by China’s emergency brake, an initiative that limits individual shares from falling by more than 10 per cent in a single day.

This was further aided by the fact that a substantial number of stocks still remain suspended from trading.

By the end of the midday session, only 11 companies trading in Shanghai and Shenzhen were still in positive territory.
At the same time, the U.S. markets also saw major sell-offs. The Boston Globe reports:
US stock markets sank in morning trading Monday in a wave of fear that circled the globe after a historic plunge in Chinese stocks.

The Dow Jones industrial average fell more than 1,000 points in early trading and the Standard Poor’s 500 index slid into correction territory — Wall Street jargon for a drop of 10 percent or more from a recent peak.

The major stock indexes pared some of the losses that dented investment accounts by midmorning. Treasurys surged as investors bought less risky assets.

The Dow was down 378 points, or 2.3 percent, to 16,081 points as of 10:59 a.m. Eastern time. The S&P 500 dropped 49 points, or 2.5 percent, to 1,921. The Nasdaq composite fell 111 points, or 2.4 percent, to 4,594 points. The three indexes are down for the year.

Heightened concern about a slowdown in China had already shaken markets around the world on Friday, driving the U.S. stock market sharply lower. A big sell-off in Chinese stocks on Monday caused the rout to continue.

That’s left investors unsure of how to gauge which companies are might be a good bet to weather a slowdown in China.

‘‘What’s a company that’s doing business with China actually worth right now? When you’re not sure, you tend to sell,’’ said JJ Kinahan, TD Ameritrade’s chief strategist.
 This article from The Financial Times notes that, just over the last 2 weeks, "global stock markets have lost more than $5tn in value." It also notes that China is not expected to step in and support its equities markets since it is attempting to stop the decline in the value of its currency.

Some expect worse to come. From The Independent:
A former adviser to Gordon Brown has urged people to stock up on canned goods and bottled water as stock markets around the world slide.

Damian McBride appeared to suggest that the stock market dip could lead to civil disorder or other situations where it would be unreasonable for someone to leave the house.

“Advice on the looming crash, No.1: get hard cash in a safe place now; don't assume banks & cashpoints will be open, or bank cards will work,” he tweeted.

“Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.

“Crash advice No.3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.”

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