From the Wall Street Journal on “5 reasons why Chinese stocks are tanking”:

  1. The spark that lit the fire for Tuesday’s selling was a decision from China’s securities clearing house that banned investors from using low-grade corporate debt as collateral for short-term loans, known as repurchase agreements. The move is part of broad reforms to clean up China’s debt-laden financial system, but traders panicked and quickly sold liquid assets to raise cash, prompting a selloff in the bond market that later spread to the stock and currency markets.
  2. The rally was looking dangerously overbought and due for a pullback
  3. Much of the buying in the recent rally has been from … margin trading … it has also made the market unstable
  4. China’s economy has been showing almost daily signs of slowing
  5. China’s stock market is notoriously volatile, with many retail investors seeing it as plagued by insider trading and hobbled by state regulation of initial public offerings

Any further thoughts welcome in the comments!

6. All of the above ….