Chinese markets’ explosive New Year

Chinese markets have had a spectacularly bad start to the year. But the fuss may be overblown – investors should focus on the long term.

Andrew Van Sickle
By
published
in Features

New Year's events "can be anti- climactic", says Lex in the Financial Times. But in China, markets "began 2016 with enough excitement to make traders choke on their bubbles". The blue-chip CSI 300 index fell 7% last Monday, the worst-ever start to the year for Chinese markets. It made a marginal recovery the next day, although the wider Shanghai Composite index and the Shenzhen Composite index fell further.

The Chinese authorities are showing that "there's no amount of stockmarket volatility that government interference can't make worse", says Alistair Osborne in The Times. After constantly meddling with the market during last summer's slump, it has introduced a circuit breaker: the exchange halts trading after a 5% move and closes completely after a 7% one. What a flop. "The whole caper's become self-fulfilling." Knowing that trading can be halted, investors now have an extra incentive to get out.

Worrying about a downturn

The fuss looks overblown, says Capital Economics. Outside of manufacturing,things look better. The official gauge of activity in the service sector has risen to a 16-month high. Indicators designed to measure how the economy is doing without relying on questionable official statistics are also looking up: electricity output in November was up year-on-year for the first time since August.

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Focus on the long term

Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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