The Shanghai stock exchange is surging. It’s up by an astonishing 43% in the last six months alone, and Chinese regulators are starting to express concern.
So regulators are warning that people should “invest rationally, respect the market, fear the market, and bear in mind the risks present,” according to Bloomberg. The original text of the comments from China Securities Regulatory Commission (CSRC) spokesman Deng Ge is here.
Here’s the absurd climb of the Shanghai stock market:
Between them, Shanghai and Shenzen’s stock exchanges turned over more than a trillion yuan today ($US162.6 billion, £103.7 billion) for the first time ever. There’s some discussion about whether that can possibly be matched with the country’s fundamental economic performance: the huge economy is slowing down, and a recent report found a gargantuan $US6.8 trillion of investment had been wasted in recent years.
Capital Economics’ John Higgins says that although China’s interest rate cuts have helped to boost financial firms listed in Shanghai, he doesn’t think the rally can last at its current pace:
There are substantial headwinds facing banks, property developers and industrial firms, which make up much of the Shanghai Composite. So if the recent signs of mania — such as the frenzied pace of new equity account openings — trigger a further substantial rally in the market, we would be surprised if it didn’t largely unwind further down the road.
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