Monday, 24 August 2015

Black Monday for China's Markets

Can Chinese President Xi Jinping continue to prop up the stock market?
World markets are recoiling in horror watching China's stock market take a big tumble today -- the Shanghai Composite Index plunged 8.52 percent, the worst close since 2007. The Hang Seng Index was down 5.17 percent, Shenzhen 7.7 percent.

The selling spree was estimated to erase $692 billion of market value in Chinese stocks. It's yet another sign of the Chinese economy slowing, but also that the central government doesn't really have control over the market like it thought it would.

A few weeks ago Beijing tried to prop up the market throwing lots of money into it to stabilize the volatility of stocks, but it wasn't enough to keep markets from staying in jittery mode as we saw today.

Chinese President Xi Jinping may have consolidated his power politically, but economically does he have the ability to control millions of shareholders?

Others believe the massive sell-off is an opportunity for a market correction, that the Chinese stock market was a bubble that needed to deflate a bit.

However Chinese stocks haven't been doing all that well except for a few days of massive growth spurts in June that then quickly leveled off and then fell.

Experts are predicting the Chinese economy will take a while to recover, seeing as production has slowed down, but when is anyone's guess.

"The government got badly burnt last time... Now the government doesn't want to underwrite a particular level. It doesn't want to be dictated to by market pundits," says veteran market watcher Fraser Howie.

Whoever said the stock market -- especially China's -- isn't a gamble?

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