China’s “Black Monday†triggered record losses for U.S. stocks as well as all other major markets across the world. Concerns about the state of the world’s second largest economy and heavy losses for its equity markets have sparked a selloff which has erased yearly gains for several major indexes.
Given China’s current state of affairs and the lack of investor confidence in its markets, such concerns are expected to linger going forward. Given the circumstances, stocks which have survived the strongest selloff in recent times may be good additions to your portfolio.
China’s Black Monday
The Shanghai Composite Exchange plunged, losing 8.5% on Monday. China’s main stock index moved into the red for the year, while it plunged almost 38% from its peak in mid-June. Meanwhile, China’s small-cap stocks also took a beating, with the smaller Shenzhen Composite plummeting 7.7% yesterday. The Hang Seng China Enterprises Index slumped 5.8%, hitting its lowest point in nearly 18 months.
On Friday, the benchmark was inching below the crucial 3,500 mark, before recovering during the last few minutes of the day. Dismal economic data showed that the government’s efforts to prop up the economy were having little or no impact as of now.
Preliminary PMI estimates from Markit Economics and Caixin Media fell to 47.1, a 77-month low. The decline in manufacturing activity came in despite Beijing’s move to devalue its currency to boost its export oriented companies.
U.S. Market Rout
Markets had suffered significantly on Friday with the Dow entering correction territory. Additionally, the blue-chip index and the S&P 500 posted their biggest weekly declines since Sep 2011. The Nasdaq recorded its steepest weekly drop since Aug 2011. This was primarily attributable to concerns over the state of China’s economy.
Losses spilled over into Monday with the Dow plunging by more than 1,000 points during the first six minutes of trading. The index finished in negative territory, losing 3.6% and settled at its lowest level since Feb 2014. All 30 Dow components ended in the red.
