Market history · Equities ·
China's stock market peaks, then loses a third of its value
Chinese shares peaked on 12 June 2015, the same day the regulator, the China Securities Regulatory Commission, announced draft rules to cap margin lending, according to the House of Lords Library. From the peak the Shanghai Composite Index lost 32% of its value and the Shenzhen Composite 40%. The Washington Post estimated about $3 trillion of share value was wiped out, equivalent to the entire French stock market.
The Chinese government intervened heavily to stabilise prices. Time reported in July that China had its worst month in six years, and NPR reported on 27 July that its market had suffered its biggest single-day drop in eight years. The turmoil was followed by the yuan devaluation of August.
A market in which many individual investors borrowed to buy shares showed how quickly leverage can reverse.
The takeaway
Retail enthusiasm financed by borrowing can lift a market fast and drop it faster. State intervention may slow a fall but does not remove the cause.
Sources
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.