China’s actions to save stock market can hurt

China’s actions to save the stock market can hurt even more

economists
fear that the support
Government can stimulate more
a “bubble” in the stock market of China.
The aggressive policy of the authorities in response to
the drop in stock quotations contradict
their earlier promise to leave
a crucial role in the economy of natural
market processes. In the same time,
strengthened the faith of private investors in the
that Beijing will always save them.

Shanghai
Composite over the past three weeks
I lost 29%. During this time
Government initiated immediately
several serious steps to save
market. Suspended IPO. brokerage
companies and mutual funds are obliged to
buying securities. increased stock
the quota for foreign investors.
Central Bank to provide poobeshal
liquidity to help investors
get loans to buy shares.

Squall
rescue measures can stop
panic in the short term, but
Some economists warn
it can stimulate new bubble
assets. Investors may conclude
that Beijing will encourage
Any, even the most reckless investment.
Economist Tim Kondon ING Group
He said: “No need to be a professional
market player, not to see here
large risks “.

AT
Monday Shanghai Composite opened
an increase of 7.8% immediately. It seemed to be decisive
Government will support steps
These achievements, however, by the end of trading
day growth fell to 2.4%, and the day
index even held on the negative
territory. Investors and analysts
It said that the end of the session was saved
purchase of shares of “blue chips”
public authorities.

Some
economists say that the leadership
Middle Kingdom, possibly overreact
respond to systemic risks in China.
“They probably panicked,” –
commented economist at Societe
Generale Klaus Baader. he set
questioned the
addressed to the stock market authorities.
– “market, in which intervene
power – very dangerous. If the market
is in the correction phase, and you
wedged into this process with a wrench
key – it gives rise to growing insecurity. ”

Now
The Shanghai stock exchange index is still 50%
higher than at the beginning of his crazy
rally, and 14% higher than at the beginning of the year.
Stock investors make
a very small segment of the Chinese
society. Banks, at least on
paper, are not under the greatest threat.
Economists say that the collapse in the
unlikely the consumer market.

analysts
commented that the policy of the state
should promote the functioning
the stock market is not the direct intervention
in the price of stocks, and policies,
strengthening financial and economic
architecture: “China must first
strengthen its supervision over financing
margin transactions, especially those
who are outside
regulatory control. You also need to
stimulate economic growth,
the foundation of a healthy stock market. ”

risks
– including political ones. Now
authorities fear that a sharp pullback
the stock market may lead to
social tensions.

greater
part of the public funds directed
Now on the market and may eventually
lead to volume expansion state
property. China’s central bank moves,
which indirectly help investors
to get a loan for the purchase of shares may
worsen the risks of margin
funding, which is so wanted
reduce power.

Seeing
achievement of certain stocks
target level, investors may again
start selling in order not to lose their
facilities.

Many
see state intervention
last week a huge step back in
case for the yuan included in the list of the world
reserve currencies. The renminbi has become
convertible, a country must have
a market that is transparent and
which does not threaten the political
intervention. State participation in the
stock market functioning
It is destroying trust and creating lasting
obstacles in attracting international
capital. This does not make the market more attractive
for global investors.

Related posts

Next posts

Leave a Reply

Your email address will not be published. Required fields are marked *