Experts Are Cautioning Everyone To Stay Calm After Monday's Stock Market Sell-Off

An investor sits in front of an electronic board showing stock information at a brokerage house in Beijing, China, January 4, 2016. REUTERS/Li Sanxian

David Wertime, Foreign Policy: Experts: Keep Calm After China’s Latest Stock Market Plunge

They say the drop has more to do with technical issues and a herd mentality than anything else.

On Jan. 4, Chinese stock markets offered a rude greeting to the new year. The benchmark Shanghai Composite Index closed down 6.86 percent, with trading paused, then eventually halted as part of what analysts are calling “circuit breaking” measures that shut down trading after major losses. Meanwhile, major indices in the United States, Europe, and elsewhere in Asia are sharply down.

Chinese stock markets were much in the news over the spring and summer of 2015, when a huge rally, followed by an almost equally huge plummet — and a clumsy government effort to prop up prices — made world headlines. And while China’s economy is far from contracting, its growth continues to slow. Against this background, Foreign Policy asked experts to place the Chinese stock market’s recent volatility in context. Stephen Roach, a Senior Lecturer at the Yale School of Management, was previously Morgan Stanley’s chief economist; Chen Zhiwu is Professor of finance at the Yale School of Management; Yukon Huang is a Senior Fellow at the Carnegie Endowment and was previously the World Bank’s country director for China; and Bill Bishop publishes the influential China-focused newsletter, Sinocism.

WNU editor: Everyone is worried .... and justifiably so.