BEIJING: China’s stock markets plunged toward bear territory on Friday, in a sharp turnaround after a year of strong gains.
The Shanghai market, China’s largest, closed down almost 20 per cent from its recent peak, while the second-largest Shenzhen market fell 20 per cent, entering bear-market territory. The country’s start-up stocks have lost a quarter of their value since hitting a record high earlier in the month.
The Shanghai Composite Index became one of the best-performing markets globally last year after years of dismal performance. This year, it has been up as much as 60 per cent, as local investors — cheered by a series of stimulus measures introduced by China’s central bank last November — have borrowed a flood of cash from their brokerages to invest in the stock market. The benchmark hit its highest level since the global financial crisis on June 12.
The Shanghai Composite Index fell 7.4 per cent to 4192.87, after a 13 per cent loss last week.
The smaller Shenzhen Composite Index fell 20 per cent from a recent peak. The benchmark was last down 7.9 per cent at 2502.96 on Friday, well off its record high of 3140.66 earlier this month.
The selling has been particularly dramatic among riskier start-up stocks. The ChiNext Price Index closed down 8.9 per cent at 2920.70, tumbling 27 per cent from its record close of 3982.25 on June 3.
Investors have started to question the longevity of that stimulus-driven rally, and analysts are sounding louder warnings that China’s market has reached unsustainable levels. A sell-off over the past two weeks has taken a big bite out of earlier gains.
