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This entry was posted on July 10, 2015 at 6:35.
BEIJING
Beat on hitting, the stock market has recovered. Chinese markets higher, therefore, thanks to repeated attempts by the Government to stop the free fall of the price lists. Shanghai gains 6.8%, Hong Kong 4.9 percent.
Crucial proved to be a ban on sale of shares to the major shareholders of listed companies, followed by measures on bank loans related securities. Another directive, therefore, which prohibits companies that own more than 5% of the share capital of a company to sell shares of the same company. They have also been announced for some margin requirement milder.
These two latest maneuvers are, respectively, the fourth and fifth government intervention and follow tweaking interest rates, barring IPO and the establishment of a small fund of $ 19 billion with the order to stabilize the market. The three previous interventions have had no effect.
The latest move today has instead had finally happened, and the Shanghai market has recovered going over quota 6 percent.
The easing of margin requirement is a move quite effective, but very risky, because it transfers the risk from investors to brokerage firms. It is therefore natural that today the market breaths, but how long?
The blow, in fact, has been heavy for China. The collapse last month have shaken investor confidence, but Beijing in a bid to restore it intervened heavily with the establishment of a fund from 120 billion yuan to stabilize the market; the commitment by the China Mutual Fund Association and some funds to buy shares and a commitment to continue buying ETFs.
Some companies, however, have decided to suspend trade to prevent panic sales , with the result of blocking over 50% of the entire stock market. A waves have followed sales offshore because of the lack of liquidity sull’azionario onshore, driving down the Hang Seng Index by about 5.8%.
Hard to estimate now when things will return calm.
As you know, the Chinese market is still immature, very volatile, it is difficult for foreign investors to enter. But the market is the second largest economy, the biggest importer and exporter, the commodities giant that devours life and thus as happened two days ago also the prices of raw materials, which are also affected by the collapse of the Chinese stock exchanges.
The giant speculative bubble exploded, technology stocks of real estate values in Shenzhen to give the measure of the size of China. Unfortunately, perhaps this is the first time that stock markets undergo this internal backlash at a time when China, unfortunately, brakes in terms of real growth. 7% will be very difficult to achieve this year.
It is also difficult to determine whether that recovery can be reversed or, rather, a technical rebound because the gap between the values of the market and the fundamentals of the companies remains large.
Despite the collapse of recent weeks, the Shanghai stock index posted a performance of 70% in the last 12 months, even as the economic situation in China showed signs of weakness.
The game upward triggered by the infamous Wealth Management Products that the government has tried unsuccessfully to counteract and excessively low interest rates have caused a bubble that has led the market by value in 2000, approximately, to ‘ current 3,700. You could go even more in order to eliminate the bubble effect and return to the assessments in line with economic fundamentals.
Yesterday, another positive note, the slight rise in inflation in China. In June, the consumer price index was up 1.4% on an annual basis, slightly above market expectations (+ 1.3%). Official figures, then, away fears for the start of a phase of deflation. In May, inflation had recorded an annual growth rate of 1.2 percent.
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