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Hang Seng Index Sees Worst Plunge Since 2008: Here’s What Happened

china market

On October 8, 2024, the Hang Seng Index dropped by 9.4%, marking its biggest fall since 2008. This happened for several reasons: global economic concerns, like rising inflation and tensions between the U.S. and China, played a role. Worries about China’s slowing economy and the ongoing problems in its real estate sector, especially with companies like Evergrande, added more pressure. Additionally, many investors sold their stocks to take profits after earlier gains, causing a chain reaction of more sell-offs and worsening the market drop.

China Market Fall

Top 5 Reasons for China's Stock Market Fall

  1. Lack of Strong Government Stimulus: Investors were hoping for major economic support from the Chinese government, like cash injections or tax cuts. However, the government's measures were smaller than expected, leading to disappointment and a market drop.


  2. Economic Slowdown: China's economy has been growing more slowly due to factors like lower consumer spending, reduced manufacturing, and weakened exports, which has made investors nervous.


  3. Real Estate Crisis: The real estate sector, especially large companies like Evergrande, is struggling. This sector makes up a big part of China’s economy, so its problems have spread to other areas of the market.


  4. Global Economic Uncertainty: Issues like rising global inflation, geopolitical tensions (especially with the U.S.), and concerns over interest rate hikes worldwide have also made investors less willing to take risks in Chinese stocks.


  5. Profit-Taking by Investors: After some initial gains in the stock market, many investors decided to sell their stocks and take their profits. When lots of people sell at once, it can lead to a market fall, which then triggers more selling.


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China’s Economic Outlook and Recent Announcement

Earlier, Zheng Shanjie, Chairperson of China's National Development and Reform Commission, had stated that China was confident of achieving its economic goals for 2024. The country plans to use 200 billion yuan (approximately $28.36 billion) from next year's budget to fund various investment projects and support local governments, according to a report by Reuters.


Global Markets React

The disappointment over China’s stimulus measures had a ripple effect across global markets. U.S. stocks initially saw gains, with the S&P 500 rebounding from an earlier dip of nearly 1%, and technology stocks rising by 1.3%. However, shares of some companies that do significant business with China were impacted. For example, Estee Lauder shares dropped by 2.3%, while Wynn Resorts fell by 2%.


Commodity Markets Also Affected

The drop in the Hang Seng Index and the lack of strong stimulus measures from China also impacted commodity markets. The price of Brent crude futures fell by almost 2%, reflecting investor concerns about the strength of China’s economic recovery.


Concerns for Future Growth in China

According to the World Bank, China’s economic growth is expected to slow further in the coming years, despite stimulus efforts. The forecast for China’s growth in 2025 has been revised down to 4.3%, compared to an expected 4.8% in 2024. This slowdown may also affect other economies in the East Asia and Pacific region, including Indonesia, Australia, and South Korea.


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FAQs


Q: What is the Hang Seng Index?

The Hang Seng Index (HSI) is a stock market index that tracks the performance of the largest companies listed on the Hong Kong Stock Exchange.


Q: Why did the China market crash?

The China market crashed because the government’s plans to boost the economy didn’t meet investors’ expectations. They were hoping for bigger investments to support growth. There are also concerns that China’s economy is slowing down and may grow less in the coming years. This made investors nervous, causing stock prices to drop. Global factors, like U.S. economic news and falling oil prices, also played a role. Overall, this led to a big drop in the Hang Seng Index, which fell by 9.4%, the largest drop since 2008.


Q: Why is Hang Seng falling?

The Hang Seng Index is falling because investors are disappointed with China's latest efforts to boost the economy. They were expecting bigger measures and investments from the government, but the actions taken were smaller than hoped. Additionally, there are concerns about China’s slowing economic growth, which is making investors worried about the future. Global factors like inflation in the U.S. and lower demand for commodities like oil are also affecting the market. As a result, many investors are selling their stocks, causing the Hang Seng Index to drop significantly.


Q: Is China's economy falling?

China's economy is not falling, but it is slowing down. Growth has been weaker than expected in recent years, and there are concerns about the future. Factors like the effects of the COVID-19 pandemic, challenges in the real estate market, and high debt levels in local governments have slowed economic progress. Although the government is introducing measures to support the economy, they haven’t been enough to boost confidence. The World Bank also predicts that China's growth will slow further in the coming years, but it is not in a full economic decline.




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