Chinese Stocks Hit Four and Half Year Lows on Credit Crunch Fears

Chinese stocks touched a four-and-a-half-year low on Tuesday amid persistent concerns over the government’s credit-tightening policy.

The Shanghai Composite SSE index fell as much as 5.8% at one point, before a late rally meant it ended down 0.3%.

The rebound came after China’s central bank said that it would guide market rates down to “reasonable” levels.

Last week, the bank indicated that the era of cheap credit was over, helping to trigger falls on global markets.

The sharp falls seen earlier on Tuesday marked the first time since January 2009 that the Shanghai Composite index had fallen below the 1,900 point mark.

The steep decline meant that the index had fallen by more than 20% since the high reached in February, meaning it had entered a “bear market” – defined as a fall of at least 20% over a period of at least two months.

via BBC

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