The Chinese stock market experienced a nightmare day this Monday, with a fall of almost 8% in the CSI 1000 index. The latter brings together small and medium-sized companies listed in China. Faced with investor panic, nearly 30% of stocks were suspended due to the 10% decline limit imposed by the authorities.
Stock market crash in China: What are the factors?
For a few days now, the Chinese stock market is struggling to get by. The reasons for this crash are multiple:
- fear of monetary tightening by the Chinese Central Bank;
- the spread of the Omicron variant of Covid-19;
- geopolitical tensions with the United States,
- financial scandals involving companies like Evergrande or Didi.
Chinese stock market in crisis: The sectors most affected by the debacle of small stocks
The sectors which suffered the most from the fall of the Chinese stock market were those which had benefited from the pandemic. This includes technologies, consumption and health.
The Star 50 index, which brings together innovative companies, lost 5%. As for the Beijing 50, Shenzhen and Shanghai Composite indices, they have fell from 4% to 3%. These indices reflect the performance of small stocks, which represent around 80% of the stock market in China.
These companies are also more affected by the increased regulations imposed by Beijing on strategic sectors such as the internet, education and security.
The reasons for the resistance of large Chinese companies
Large Chinese companies seem to be resisting storm. The CSI 100 and Hong Kong 50 indices, which represent large caps, have even ended the session on the rise : 0.5% and 0.8% respectively.
These companies benefit from:
- their exposure to international markets,
- their support by the Chinese government,
- their less dependence on the domestic situation.
Some stock market experts expect volatility to persist in the coming days. Others, however, see this correction as a buying opportunity. File to follow…
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