Tumultuous Week on Wall Street Ends With a Small Rally

But the sell-off Friday morning also served as a reminder that major markets in Asia had risen greatly, and in the minds of many analysts were ready to come down.

For example, last year was stellar for shares of Chinese companies that trade around the world. The MSCI China stock index, which tracks shares of some of China’s biggest companies, is still up nearly 50 percent since the beginning of last year even after the recent stock slump.

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Tumultuous Week on Wall Street Ends With a Small Rally
Tumultuous Week on Wall Street Ends With a Small Rally

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“We are witnessing the longest rally in the history of Chinese stocks,” analysts at Goldman Sachs wrote to clients early this week, adding, “A tactical correction appears overdue and markets could fall further.”

Shares in Shanghai were down more than 4 percent midday Friday, while Hong Kong shares were down more than 3 percent. Shares in Tokyo were down 2.7 percent.

Investors were also keeping a careful eye on China’s currency, the renminbi. The currency, which is carefully managed by the Chinese government, took a hit on Thursday and fell by as much as 1.2 percent.

Before that, the currency had been rising steadily against the American dollar, leading to worries that Beijing could step in further to contain it. World markets can be sensitive to sharp swings in the renminbi. In 2015, the Chinese government devalued the currency, sending global markets into turmoil.

“You can twist yourself into knots trying to figure out what happens day to day,” said Andy Rothman, investment strategist at Matthews Asia.

“But the Chinese government has a lot of control on the currency,” he added. “They can’t control the direction but they can control how much it moves in that direction.”

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