China’s main Shanghai Composite Index and the CSI300 both plunged by over 2% on Friday morning, making Chinese shares fall by over 10% from their highs and entering correction territory. The decline marks the first drop of over 10% since January of last year.

Investors sold stocks as Beijing begins cracking down on illegal margin trading, along with a new wave of IPOs across mainland China this week totaling around 6.7 trillion yuan (US$1.1 trillion). Margin trading is over three times as prominent in China than in the US.

The drop also comes a day after Janet Yellen indicated that the Federal Reserve will be slow in raising interest rates, highlighting investors’ concerns for the US, China and the rest of the global economy.

The Chinese shares have had impressive gains this year and remains up over 45% year-to-date. The Shanghai Composite began 2015 standing at 3,234 points, and remains over 4,600 points as of Friday, June 19th.

About Liana Lie

Liana Lie has been an equity analyst in the greater China area for over 20 years. She is also a specialist in retail, office and residential, real estate in Hong Kong and Shanghai.
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