Forget your plans for a quiet, relaxing summer. The stock markets of the world’s second largest economy are tumbling; and when Chinese equities turn bearish, it can be brutal.
This is unlikely to be a localized event. The big fear is a rerun of China’s stock market rout of summer 2015, which saw a 45% selloff. There were further major selloffs in early 2016 and 2018. The knock-on effect for emerging markets then saw average credit spreads rise by a quarter and the MSCI emerging markets equity ETF fall by over 25% in the second half of 2015 into early 2016. China’s latest stumble could lead to skinned knees around the world.