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Chinese Stock Markets Continue to Go Down
By admin July 9, 2015

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China-Stock-Market-crashThe Chinese stock market took another nosedive on Wednesday, as investors shrugged off a series of support measures by Chinese regulators. The central bank made a public statement in support of the market since it cut interest rates in late June.

 

Both the Shanghai Composite Index and the Shenzhen Component fell 8% and 5% respectively. After 10 minutes of trading, 1,000 shares had dropped by the daily limit of 10% and were automatically suspended. Also, about 1,400 companies filed for a trading halt to prevent further losses. Approximately, 950 of the worst-hit firms suspended trading altogether. This caused panic, irrational selling off and was described as “leading the stock market to a situation of intense liquidity.”

 

However, the People’s Bank of China assisted by acquiring liquidity in an effort to steady the stock market, through inter-bank lending, mortgage financing and floating financial bonds. Additionally, the China Securities and Finance Corporation (CSFC) will purchase small- and medium-sized listed companies, which have suffered the most extreme losses. Ayako Sera, a senior market economist at Sumitomo Mitsui Trust Bank in Tokyo, said, “Shanghai’s early losses were like a cliff-dive, which had a huge impact on investor sentiment.”

 

The Chinese government attempted to stabilize the markets yet were unsuccessful. While analysts and economists believe the falls will continue for at least the coming weeks. Previously, China’s stock market had been the top-performing in the world and peaked in June. The Shanghai stock market had risen more than 150% in 12 months but fallen 30% in the past couple of weeks. China’s premier, Li Keqiang, was criticized for failing to mention the deepening market crisis in a talk on Tuesday.

 

Christopher Balding, a professor of economics at Peking University, believes that one immediate concern is the losses that will be faced by individuals, which could lead to protests in the streets. Unlike other stock markets, China has 80% of small retail investors rather than institutional investors, which directly affects citizens and will cause concern for the Chinese government. On a global scale, investors are worried that a market crash could destabilize the world’s second-biggest economy.

 

For more information:

 

http://www.theguardian.com/business/2015/jul/08/china-stock-markets-continue-nosedive-as-regulator-warns-of-panic

 

http://www.theguardian.com/business/2015/jul/07/china-stocks-tumble-again-after-premier-li-keqiang-fails-to-mention-crisis

 

http://www.bbc.com/news/business-33440565

 

http://www.economist.com/blogs/freeexchange/2015/07/chinas-stockmarket-crash


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