Comparing Chinese bear markets and bouncebacks
China’s zero-Covid policy was tough on its equity market. As our chart shows, it was the worst bear market in recent memory, posting a maximum intra-year decline, or drawdown, of 46 percent from its peak that year.
However, steep declines by the MSCI China Index are not unusual. As the European sovereign debt crisis sideswiped markets around the world, the Chinese benchmark posted a maximum drawdown of 38 percent during 2011.
Amid US-China trade tensions during the Trump administration, the drawdown reached 33 percent. And in 2015, a period of market froth in China was followed by a 35 percent decline on recession concerns.
For investors gauging whether history endorses a bet on China’s reopening, there was a modest rebound after the 2011, 2015 and 2018 episodes, averaging 18 percent over 6 months and 23 percent over a year and a half. The MSCI China Index is already 30 percent above its October trough.