Chinese stocks just saw a colossal sell-off late in trading, sending the Shanghai Composite index from a small increase to a 5.43% crash, the biggest in five years.
Here's how it looked:
That has not done much to dent the meteoric rise of Shanghai's stock market, which is still up by 39.47% since January. But such rapid slumps will most likely be raising a few eyebrows.
Only Monday, Shanghai stocks were being sent through the roof by some abysmal trade numbers. The stock exchange is setting record trading volumes, and it's extremely choppy.
Analysts have noticed that Shanghai's boom is consistent with the same story we've seen before in China: as valuations climb, retail investors pile in and prices surge even further. "China’s retail investors have an unfortunate track record of jumping in at the top of the market," according to Bloomberg's Tom Orlik, while Bespoke Investment group note that the explosion in Shanghai equities has coincided almost exactly with a big jump in the number of Chinese brokerage accounts being opened.
So it's no surprise that Chinese regulators are already warning investors about the sharp rally.
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