Panic sell-offs continue on the Chinese stock exchange. From the beginning of 2015, CSI 300 futures rose only by 7%. The situation with HKEX is even worse: it fell by 7.3% to a 4-year low. Shanghai Composite decreased by 7.5%. Interestingly, the drop of the Shanghai Stock Exchange’s index for the three latest sessions is the biggest one since 1996.
The drastic rise in the Chinese exchange was caused by a vast number of unprofessional investors, i.e. ordinary citizens the part of whom did not even have higher education. It is known, that credit funds were used for most operations.
Now, these factors undermine the stocks growth. Small speculators have to close their positions to let some of the air out of the bubble.
The maximum tumble was shown by ChiNext that sank by 19%, i.e. by half of its annual growth.
The drop in the Chinese stock exchange made the People's Bank of China carry out quantitative easing for some banks. Its benchmark lending and deposit rates were both reduced by 25 basis points to 4.85% and 2% respectively. This is the fourth cut in the last 8 months.
However, by the end of the session, the indices managed to pare most of their losses.