Jul
14
Has China’s Stock Market Euphoria Ended?
The Shanghai Composite Index more than doubled since last year, driven by anticipation of growing economy, over-use of margin lending, and the heavy government support. However, it was irrational to expect the market to continue endlessly moving especially with mind blowing valuations compared by many to those during the dot-com bubble. As the market began to slide the Chinese retail investors that make up the majority of the traded volume began to exit in anticipation of further declines, unwinding heavily leveraged positions in the process. Even though the Chinese government massively interfered to boost the prices, the market fell by more than 30% in the space of one month. The recent slowdown in the Chinese economy creates a clear question: has China's stock market euphoria ended?
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