The Shanghai Composite Index ended trade on Monday down 8.49 percent, after all of the yearly gains were wiped out of the market.
The fall comes as investors were disappointed that policymakers announced no support for the markets over the weekend.
By Simon Denyer
August 24 at 9:31 AM ET
BEIJING — Stock market jitters spread throughout Asia and the rest of the world, and Wall Street braced for a major plunge, after Chinese stocks recorded their biggest slump in eight years during what China’s state media dubbed “Black Monday.”
The collapse in Chinese stocks was fueled by mounting concerns about an economic slowdown here, but it has fed into a wider sell-off in emerging markets. Asian shares hit a three-year low Monday, and the nervousness appeared likely to spread to Wall Street after last week’s sharp falls there.
“A lot of questions are being asked by investors,” said Chris Weston, chief markets strategist at IG in Melbourne. “This is a confidence game, and when you don’t have confidence, you press the sell button.”
Shanghai’s main share index closed down 8.49 percent, but trading in hundreds of shares was suspended after they lost 10 percent.
The Shanghai Composite Index has fallen by nearly 40 percent since June, after rising more than 140 percent last year. Tokyo’s Nikkei-225 index recorded its biggest drop in more than two years, falling 4.6 percent to a six-month low, while the MSCI index of Asia-Pacific shares outside Japan sank 5.1 percent to a three-year low.
The benchmark Shanghai Composite Stock Index lost more than 7 percent on Monday. (Rolex Dela Pena/EPA)
Overnight futures trading suggested further losses were in store for the Standard & Poor’s 500-stock index in the United States after last week’s 6 percent decline. S&P futures dropped 3.2 percent, with even favored stocks such as Apple and Netflix losing more than 4 percent in early New York trading, Bloomberg News reported.
In early afternoon trading in Europe, Britain’s FTSE 100 index was down more than 5 percent, Germany’s DAX index was losing nearly 5.2 percent, the CAC 40 in Paris was off 4.8 percent, and the Stoxx Europe 600 index fell 4.6 percent. The Dax has now fallen more than 20 percent from its peak in April. Companies in the FTSE 100 were on track to lose roughly 70 billion pounds ($110 billion) in value Monday, the Guardian newspaper reported.
Middle Eastern stocks also took a hit, with markets in Saudi Arabia, Dubai, Egypt and Israel down sharply.
“Markets are panicking,” Takako Masai, head of research at Shinsei Bank in Tokyo, told the Reuters news agency. “Things are starting to look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable.”
Over the weekend, China announced it would allow pension funds to buy shares for the first time, but the move failed to restore confidence. The state news agency Xinhua tweeted that it was “Black Monday!” as China’s shares joined the global panic.
Some traders said the authorities’ failure to step in to buy shares Friday — when the market fell 4.2 percent — generated a sense of panic and forced some funds to liquidate positions. Although pension funds have reported net assets of some $550 billion, experts said they might not want to buy aggressively in a falling market.
“The pension fund signal didn’t work, which proves that investors have entirely lost confidence in the market,” said Wu Xianfeng, president of Longteng Asset Management in Shenzhen. “The market has been in a panic since last week.”
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