Yesterday we told you about a some troublesome events over the past several days. Today further details about one of those events is starting to surface – and it’s not looking good!
While we’re all looking at the collapse of the economy in Greece and people banning the Confederate flag, the stock market in China has been having problems.
Yesterday (July 8th, 2015) the Chinese stock market crashed. So far the equivalent of US$3.5 trillion ($3,500,000,000,000) has been wiped out by falling prices.
Financial experts in China are comparing this crash to what happened in the US in 1929 – only their crash happened in just three weeks!
Over a thousand companies have forced a “pause” in the trading of their stocks. The combined value of all of those companies is more than $2.6 trillion. That’s around 40% of the total market capitalization.
What’s worse, this is after various exchanges and the Chinese government have attempted several measures to instill confidence in trading.
The NY Times has a detailed explanation of how the market got into trouble, and why it’s not likely to fix itself overnight: “Put all these pieces together, and here’s what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental. It is hard to see how the prices as of a month ago were justified, and easy to see why the sell-off of the last month would occur. That, in turn, implies that Chinese officials are fighting an uphill battle in their policy moves to try to stop the correction, and helps explain why their policy actions have had little effect so far.”
What do you think this will do to our import-relationship with China?
Related reading: http://www.cnn.com/2015/07/09/asia/china-stock-market-ground-zero/