But now that China’s government has arrived to rescue the market, he has decided to keep his parents in the dark and stay invested.
“I won’t exit”, he says.
As the dust settles (for now at least) on China’s frenzied boom-and-bust stock market, it’s worth looking at the role equity markets play in the world’s second-biggest economy.
But the Shanghai Composite Index is still down more than 25 percent since the beginning of June, before the crash.
The moral hazard problem is particularly acute in China as the authorities stepped in when stock valuations were still expensive, said Hong Kong-based CLSA Ltd’s strategist Francis Cheung. In other words, it is blatant centrally planned market manipulation as it’s forcing companies to not sell stocks for 6 months or until the Shanghai reaches 4500 again. The Shanghai Composite, which lists “A” shares that are priced in local Renminbi (Yuan) currency, lost a whopping 32% over a three-week period from 12 June 2015 to 7 July. Li Shuguang, a law professor at China University of Political Science and Law, said that the new securities law “should lay out in specific terms the circumstances that warrant the government effort to intervene with the market, and the policies it may take on”. The market plunged by about one-third in the last month.
“We had hoped the government would allow market forces to take a greater hold of the economy in the next five years, but this is now less likely in the light of its reaction to the stock market fall”.
In Hong Kong, stocks HSI, +0.22% fell 0.9%, while a gauge of Chinese companies listed on the city’s stock exchange HSCEI, +0.84%, known as H-shares, were down 1%. Chinese authorities have accused securities firms of manipulating share prices and allowing improper trading during the…
The state-owned China Securities Futures Corporation exists to help ensure the country’s thinly capitalised brokerage firms are able to sustain margin lending to stock buyers even during crises.
“When they get beaten down for reasons that don’t really even correlate with China, it makes a lot of sense to buy a position there”, Oberweis said. Now, everyone should ponder whether market prosperity can be sustained without support from fundamentals. She has no plans to re-enter the market, saying real estate is a better bet. That is about 40 percent of the market. “There’s too much risk”. Many believe that prices in stock markets are a reflection of the business realities in the economy but at the current moment both are at polar opposites. The fluctuations on the stock market are unlikely to be over yet and there may be more hair-raising experiences in the months to come. Fennie Wong, an official in Hong Kong for FTSE, another index provider, couldn’t give comments immediately.
Staying invested in Chinese shares has been tough on Peipeng Xing, a client manager at a bank in Beijing. When Wolf, an emerging market economist at Standard Life Investments, sat down with the nation’s securities regulators in Edinburgh in March, they had a clear message: China is enacting the free-market reforms needed to lure foreign investors and gain entry into MSCI’s global indexes. Major stock indexes in the USA and Europe cheered the news, all but erasing losses that piled up after the Greek prime minister called for a referendum on creditors’ demands.