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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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza