How Global Stock Markets reacted to the crash of the Chinese Stock Market and the causes for the crash.

1. Hisham's Writing Pad/Global/markets
Global Stock Markets
● Chinese stock market
lost almost 40% since
mid June 2015
(declines were 30%
the biggest one day
fall + 8% + 3% and
bubble was deflating
in waves)
● Dow lost 588 points
● FTSE lost STG 74
billion

2. Hisham's Writing Pad/Global/markets
Causes for the fall of the Chinese
Stock Market
● Dominated by
individual
investors
● Only 15% of
investors in the
Chinese Stock
Market are finance
professionals
● Chinese stocks
lost touch with
fundamentals and
bubble burst in
mid June.
● Measures in
favour of the
government
and propped
up by the
Central Bank,
and market
crashed
when it
stopped.
● Economy was
slowing
● Demand for oil
was declining
● Unsustainabe
debt
● Cannot balance
illusionary
market with
slowing
economy

3. Hisham's Writing Pad/Global/markets
Action to prevent further declines in
the Chinese Stock Market
● Less strict margin
requirements
● Letting speculators use their
homes as collateral
● Interest rate cut
● Stopping all IPOs

4. Hisham's Writing Pad/Global/markets
When markets crash …...
● Mark Mullins in his paper for
American Express described the
October 1987 stockmarket crash in
the US as Technology gone Crazy.
With sell orders being triggered off
as the main reason for the crash.
● In the Philadelphia Stock
Exchange investors said it
was all paper before and its
all paper now, when their
investments were worthless.
● In the Chinese market investors are determined
to get back soon. A bit of advice would be
always buy for the long term and always go
opposite the herd.