China’s actions in recent days to shore up its market are reminiscent of actions taken in the US after the 1987 stock market crash. Changes in monetary policy, support for margin calls and stock buybacks were all tried in 1987.  At the same time, some other steps taken in China currently – restricting short selling and halting stocks – were avoided.

The charts give show the run-ups and subsequent drops in both markets.  The first chart shows the CSI 300, the principal large cap index in China over the 12 months ended with July 21, 2015. Its run up from a year ago to its June 8th peak is 90%; its subsequent drop is 22%, almost the same as fall in The Dow® on October 19, 1987. Of course, we don’t know whether China’s market has found a bottom yet.  The second chart shows the S&P 500® and The Dow for the full year 1987.

 

Showing Page 1 of 2