The following chart shows Chinese stocks in green (as represented by the S&P China SPDR, versus the S&P 500 (in blue), the Dow Jones Industrial Average (in orange) and the NASDAQ Composite (in red). As this graph illustrates, global stocks don’t necessarily move together on the way up, but they have a tendency to move together when prices drop. This chart also shows that Chinese stocks appear to be more volatile than domestic stocks. China’s government tends to manipulate the capital markets, causing these types of fluctuations. Right now, China’s stock market is swooning because its economy has slowed, and there is much fear that the government’s program to prop up the economy (and in a derivative sense, its stock market) is not as robust as it once was. This is a danger of investing in an emerging market in which the government plays an outsized role.
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