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Chinese Stocks Tumble as Morgan Stanley Says Don’t Buy the Dip

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China Is Undergoing a Healthy Adjustment: Marcussen

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Chinese stocks sank the most in five months, leaving the benchmark index on the cusp of a bear market, after leveraged investors cut holdings and Morgan Stanley joined a chorus of analysts warning that shares are too expensive.

The Shanghai Composite Index fell 7.4 percent to 4,192.87 at the close, bringing its drop from this year’s high to 19 percent. Chinese stock-index futures tumbled by the 10 percent daily limit as investors rushed to hedge their positions, while the benchmark gauge for China’s smaller exchange in Shenzhen sank 20 percent from this year’s peak. A measure of equity volatility jumped to the highest level since 2009.