Mapping Fallout From ‘Black Monday’: Who Was Hardest Hit?

BY DAVID WERTIME, C.K. HICKEY

AUGUST 24, 2015

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American stock markets have just closed. As the smoke clears, FP tallies the worldwide damage.

Mapping Fallout From ‘Black Monday’: Who Was Hardest Hit?

Aug. 24, which some have already dubbed “Black Monday,” was not a kind day to global equity markets. The rout began with a massive sell-off in China, where the benchmark Shanghai Composite Index plunged 8.49 percent in just one day. Those losses echoed in major indices worldwide, including those of Japan (down 4.61 percent), Germany (down 4.70 percent), and the United States (where the Dow Jones Industrial Average fell 3.58 percent).

The map below shows the aftermath of Monday’s trading in benchmark indices in major economies worldwide. Red indicates a loss; the deeper the red, the more severe it has been. Click on any covered country for data:

The pummeling investors delivered to Chinese stocks surely had global knock-on effects, yet it is not the sole cause of the Aug. 24 swoon. Bill Bishop, who edits the influential China-focused newsletter Sinocism, told Foreign Policy that China’s stock market “has historically been irrelevant both to the domestic Chinese economy and the global economy,” but that China’s government “has tarnished its reputation with its bungled response, and so now even those foreign investors who had some confidence in the ability of Beijing bureaucrats to navigate their very difficult economic problems are now wondering if they are competent.” That may have provided “the spark for the broader global sell-off,” though Bishop also pointed to anxiety about the Federal Reserve possibly raising interest rates and an “extended rally” in U.S. stocks that made them a more expensive investment.

Meanwhile, Damien Ma, a fellow at the Paulson Institute, said that “it’s premature to conclude that this is some kind of major crisis” for the Chinese economy. “The key,” he told FP, “is how the government will now manage the real economy so that it stabilizes rather than continuing to search for a bottom” and “whether any of this has actually moved the needle on the elite consensus in pushing through reforms” on the economic front.

This article has been updated to include a comment from Damien Ma.