The Shanghai Composite and Hang Seng fall to where they’d first been in 2007 during the run-up of the bubble.

The Shanghai Composite Index plunged 5.1% to 2,928 on Monday, the biggest one-day drop since February 2020, during the Wuhan crisis. The index is now down 20% year-to-date and down 14% from a year ago. And for folks promoting buy-and-hold: The index has now returned to a level it had first reached in February 2007 during the run-up of the ridiculous stock market bubble just before the Beijing Olympics.

Also gone is the hype-and-hoopla bump that Chinese stocks got in mid-March when Vice Premier Liu He, in order to stem the slide then in progress, came out with promises of market-friendly measures.

The CSI 300 index, which tracks the biggest blue-chip stocks trading in Shanghai and Shenzhen, dropped 4.9% on Monday, to 3,933, is down 23% year-to-date, and is down 25% from a year ago.

Hong Kong’s Hang Seng Index, where many Chinese companies are listed, plunged 3.7% on Monday and is down 31% year-over-year. At 19,869, the index has regressed to a level first seen in January 2007.

The offshore yuan, after dropping 2% last week against the dollar, fell as much as 1.3% on Monday to 6.60 per dollar, the lowest since November 2020.

When it hit that level, the People’s Bank of China came out to support the currency and said it would cut the foreign-exchange reserve requirement ratio for banks next month to 8%, from 9%, thereby “increasing banks’ capabilities of forex fund use,” the PBOC said, according to Bloomberg. This announcement caused the currency to recover some from the losses earlier today, and it ended down 0.7%.

Last year, the PBOC raised the foreign-exchange reserve requirement, from 5% to 9%, to tamp down the appreciation of the yuan against the dollar.

Crude oil prices fell globally, with WTI now down 5.1%, at $96.87 a barrel, on fears of demand destruction resulting from further supply chain chaos due to prolonged lockdowns in Shanghai and potentially in Beijing, which would trigger broader and even bigger inflation that will hit demand.

Suddenly forgotten are the factors that had powered the spike in oil prices to begin with, such as Russia’s invasion of Ukraine which has made Russian oil toxic on parts of the global markets. Markets are kind of funny about these memes that suddenly do U-Turns.

What rattled markets on Monday was the fear of a draconian lockdown in Beijing, similar to the draconian lockdown in Shanghai that is now entering its fifth week and entailed measures such as fences around some residential buildings so people couldn’t get out, mass testing, and forced quarantine in massive quarantine centers. 

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