Chinese stocks have fallen 20% from their peak, entering a so-called bear market.
A bear market often signals further falls and growing investor pessimism. It’s worse than a correction, which is a 10% downward move within a short time, because there are fewer buyers willing to pick up bargains.
On Friday, the Shangai Composite plunged more than 3%, despite the best efforts of the “National Team” — Chinese government agencies that buy stocks to prop up the market.
Here’s the chart:
Here’s the Bloomberg News report on why that happened (emphasis ours):
Friday’s decline was attributed to persistent investor concerns over volatility in the yuan and a report that some banks in Shanghai have halted accepting shares of smaller listed companies as collateral for loans.
There was also bad news in the monthly bank lending figures, which signalled slower growth than expected. Chinese new bank lending came in at 597.8 billion yuan for December, below expectations for an increase of 700 billion yuan, and short of the 697.3 billion yuan level of a year earlier.