The impact of the dramatic falls in Chinese markets, and the subsequent halt to trading, has led to the worst start to the year for decades many global equity markets.
The first five days of trading for the year saw the Shanghai Composite fall by 10 per cent, in a week that also saw market trading closed on two days due to new ‘circuit breakers’ introduced by the Chinese Government.
The now-scrapped circuit breakers were intended to reduce the type of volatility seen last summer when Chinese markets dropped and dragged global equity markets with them.
The new year has been no different, with the China volatility sparking the worst week of trading for global markets in decades.
Data on the first five trading days of the year shows that Europe, Japan, Hong Kong and Australia all hit dramatic lows.
In Europe, Goldman Sachs claims it was the worst start to a year for the markets since the 1970s, reports the Financial Times.
Looking at the first four trading days, Goldman says European equities saw the largest fall for data it has, going back to the early 1970s. The markets saw a more than 5 per cent drop in the four days.
Europe’s losses were eclipsed by those in Japan, which were the second worst ever on record. Japan’s Nikkei 225 dropped by just over 7 per cent in the period, with five consecutive days of losses. It was beaten only by 1997, when a more than 10 per cent drop was recorded.
Australia marked its worst year start on record, marking a 5.76 per cent decline for the week.
Not to be left out, Hong Kong’s Hang Seng market clocked up a 6.67 per cent loss for the week, but this wasn’t the worst for the country. It surpassed this drop on numerous occasions, although it was the largest since the financial crisis.
With the terrible start to the year underway, experts remain concerned about the continuing troubles in China.
“The sudden wave of concern about China’s looming economic catastrophe is overblown,” says Dr Nikos Paltalidis, a lecturer in finance at Durham University Business School.
“However, the burst of the stock market bubble increases the concern about the knock on effect on the real-estate market. Chinese policymakers might need to respond with additional currency devaluation, and if things get worse, some form of quantitative easing, to avoid a collapse in asset prices.”