It’s official: China’s stocks are now in a bear market

It only looks cuddly.
It only looks cuddly.
Image: Reuters/Russell Cheyne
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China’s key stock indicator, the Shanghai Composite Index, fell 3.3% on Monday, bringing the drop from its June 12 peak to 21.5% and putting the market firmly into “bear” territory.

A bear market is loosely defined as a 20% drop from a recent peak, but it refers more generally to an overwhelmingly negative sentiment in the market.

And that, Chinese investors seem to have plenty of—indices in Shenzhen and Hong Kong slid on Monday as well. The Chinese central bank unexpectedly cut interest rates over the weekend, in an attempt to turn things around after markets started sliding last week.

The move seemed to have the opposite effect—trading was halted in more than a thousand mainland Chinese stocks when they reached a market limit of a 10% drop.

Stocks on the Shenzhen Stock Exchange, the tech-heavy and even more volatile cousin to the Shanghai exchange, were already in bear territory on Friday, as Quartz reported. On Monday, the Shenzhen Stock Exchange A-Share Index fell another 6.07%:

Many analysts and foreign investors said China’s markets were completely divorced from reality as they continued to climb earlier this year, despite the moribund economic data coming from the country. The current bear market is a sign Chinese investors are beginning to believe that, too.