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Shanghai Stock Exchange Composite Index over the past year. Source: Bloomberg Business

Shanghai Stock Exchange Composite Index over the past year. Source: Bloomberg Business

  • Mainland China has 2 stock markets: Shanghai and Shenzhen. Hong Kong has an independent stock exchange that is not directly linked to the crisis.
  • Chinese stock prices rose some 150% between July 2014 and June 2015, peaking on June 12. Chinese authorities reacted by limiting margin lending.
  • The boom was facilitated by margin trading — stock investments made with borrowed money. Encouraged by the Communist Party, many ordinary Chinese citizens started to invest. Despite not being professionals, they soon dominated the market. Foreign markets have been relatively unaffected by the crash in China.
  • Both stock markets have fallen since: by July 13, the Shanghai Composite Index had lost 25% of its value since mid-June, while the Shenzhen Composite Index had fallen by about 35% over the same time period.
  • China restricts foreign capital in mainland exchanges, forcing foreigners to interact more with the Hong Kong exchange. As a result, less than 2% of Chinese shares are owned by foreigners.

            For Alan Wheatley’s story, “China’s market slide: Like checking in to a roach motel”, click here.

           (by Pauline Bock and Jasmine Horsey)

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WorldAsiaFactbox: China’s stock market moves