Chinese Stocks – Largest One Day Fall Since 2009

It’s all too easy for investors to get caught up in the hype of the current “western media spin”, going about their daily business with the general belief that everything is moving along nicely – as U.S stocks remain elevated.

But one has to remember ( and especially these days ) that we live in a “global economy” where the puzzle pieces are so interconnected “planet wide” that even the smallest ripple in “other markets” can have a sizeable effect on things closer to home.

Last night ( on the heels of recent moves by The People Bank of China to actually “tighten monetary policy ) The Shanghai index fell 5.4%, registering the largest one day fall since 2009.

More from The Wall Street Journal:

 China’s stocks, currency and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.

The selloff started in the bond market, as traders rushed to sell and raise cash after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash. The turmoil then spread to the yuan, which recorded its biggest two-day tumble ever. Later, the benchmark Shanghai index slumped 5.4% to record its biggest fall since 2009.

The sudden moves serve as a reminder to global investors about the country’s shaky finances, just as China opens up its capital markets more to overseas cash. Policy makers gathering in Beijing this week for a key summit are signaling to the investing public that they should prepare for a lengthy period of slower economic growth after years of amassing debt to fuel high growth levels.

It should come as no surprise that both The U.S Dollar as well U.S Equities enter “free fall mode” here this morning – with the current global economy resting like a house of cards built on pillars of sand.

There has never been a time in our history where the “global economic picture” has been so fragile, after the crash of 2007/2008 and the last 6 years of Central Bank driven “pseudo recovery” the “tiniest little breeze” has the potential to push that house cards “way out ” into the surf.

Life preservers and floatation devices now being checked and re-checked, as Gorilla’s are generally pretty shitty swimmers.




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