Chinese Stocks – The Fear of Crashing

Chinese Stocks – The Fear of Crashing

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The fear of a stock market crash in China is growing. In just 3 weeks SSE dropped 30% – on friday it went down almost 6%.

The stocks on the most important Chinese markets are continuing to drop. After days of heavy losses, the Shanghai Index SSE lost another 5.8%. Just last week the index with the 300 largest public companied in China dropped more than 12%. Since the beginning of June they lost even 30%.

The Chinese authorities are trying to stabilize the markets and are extensively looking for evidence for illegal market manipulations. The Chinese Security Regulation Authority (CSRS) announced it set up teams investigate.

Many Chinese Investors believe the downturn comes from foreign investors, which might have short positioned Chinese stocks on large scale. Chinese investors say the government will have to stabilize the markets. A stock market crash would pull down banks, consumption and companies down and lead to social instability.

The government in Beijing tries to reduce the highly speculative trading with leverage certificates. The conditions for margin landing changed, so that the demanded securities for investors increased.

Before the peak in June the prices surged for due to private investors betting risky over month on the Chinese market. The majority of analysts evaluated the surge of 150% in the time span from November to June as the development of a bubble.

Many investors world wide are fearing a burst of this bubble now and see a threat to the weak growth of the second largest economy in the world at stake..

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