Party crashers: China's stock markets dive as Games begin

The Olympic spirit apparently couldn't find its way to the Shanghai Stock Exchange: The market celebrated the start of the Games by falling to new bear-market lows today.

So much for the government's attempt last week to jawbone share prices higher -- or at least keep them from falling further -- to avoid embarrassment during the Olympics.

The Shanghai composite index suffered its biggest one-day loss since June 27, tumbling 121.86 points, or 4.5%, to 2,605.72, the lowest since December 2006. That left it down 57% from its record high of 6,092 reached last Oct. 16.

The Shenzhen market also took a pounding today. The composite index there plunged 5.6% to 747.34, also a new bear-market low.

Some investors evidently were betting that the government would announce new market-boosting measures before the Games, Bloomberg reports here. When no new handout materialized, the path of least resistance was down.

Other reports said investors were selling because of fear that the opening ceremonies would be disrupted by a terrorist attack (they weren't).

The Chinese markets' struggles show just how hard it is to revive investors' interest after a bubble bursts. At its peak in October the Shanghai market was up 424% in less than two years.

But then, U.S. investors could tell the Chinese a thing or two about the aftermath of bubbles, couldn't we?

Photo: Would any of you folks like to buy some stocks? The scene in Beijing's National Stadium during the opening ceremony of the Olympic Games Friday. Bernd Thissen/EPA

Comments

[Ellen Hilburn]

Does this mean we'll have to pay more for cheap, plastic Chinese junk so they can regain what they've lost in the market?

[Randy]

Chinese investors don't see stocks as a personal investment. They think they are part of a government plan to distribute wealth to anyone who puts money in the pool. There is almost no comprehension of risk and reward, it's been all reward.
Unfortunately, the investors have used everything from their 'nest egg' to any job related funds they could control, even temporarily. If you think the US mortgage issues are big, wait and see what happens if China holds officials accountable for the money they were supposed to be using for public works projects. A lot of that money was 'borrowed', 'invested', and can't be paid back now.

[John]

SSE has a market capitalization of over $3 trillion U.S. dollars...hardly the stuff of "cheap, plastic Chinese junk."

[Brian Lammin]

Ellen
Its doubtful but I would suggest on behalf of the intelligent half of the World
that the next import from China is the American junk currently in Beijing.
That is of course if you there really do want that intellectually unfortunate
person back.
warmest regards.
xxx