Steve Wynn nails the devastating mistake China is making with its stock market

China’s stock market has been on an epic roller coaster ride. After a 150% jump from the start of the year, stocks are now down more than 30% from that high.

In its desperate efforts to stop the crash, China’s government stepped in, and suspended all IPOs and limited the number of trades investors could execute in a day. Some stocks even suspended trading.

But casino billionaire Steve Wynn thinks that all this intervention is a big mistake.

“I am not an expert on China and I’m not even a Wall Street expert, but I am a person who’s been in a public company for 40 years,” Wynn said during an earnings call on Wednesday. “And my own experience, had I been consulted, I would have said don’t do that exactly. Because if someone thinks that you’re going to close the door on their ability to sell or trade their shares, you can only do that for a certain length of time and then the minute you finish doing it, the people scamper for the door because there’s a loss of trust.”

Indeed, one of the most important characteristics of a well-functioning market is how freely securities can trade. This is a critical element of liquidity, and it’s something that keeps risk premiums low.

As the market finds its footing, the question remains: will funds flow back into the market? Or will more people scamper for the door like Wynn warned.

Shanghai compositeBloombergChina’s Shanghai Composite Index.

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