Chinese Stock Market Crashing

[planosteve]

The Shanghai Stock Exchange closed down 1.3% on Tuesday, which seemed benign after its three-week, near-30% crash that saw $3.2 trillion go up in smoke.

The stock market has soared over the past year despite weak economic fundamentals and deep problems for Chinese companies. The issue now is that the crash is making weak fundamentals even weaker. The market has lured tens of millions of consumers into buying stocks with borrowed money, encouraged too by the government as a way to get rich, and these folks are now going through the arduous process of getting fleeced.

Anger among these small investors is spreading on the Internet, with one campaign that has gone viral urging the government to halt the stock market altogether to prevent further losses.

Chinese stocks were hyped in the US over the past year. Hedge funds poured into the market. China showed up in the recommended asset allocations. And so Americans bought mutual funds and ETFs of Chinese stocks, and all this foreign money helped push up the market. But now, Bloomberg reports, this money is draining out “at a record pace,”

[ralph]

as best I understand , well people are losing money !!

[John in Plano]

CNBC reported yesterday that many Individual investors in China used margin accounts.

That can work on the way up in a bull market, when a market corrects which is normal , margin calls happen and a cascade effect can ripple across a market.


Stocks on that exchange were trading at 100+ p/e , which is similar to the NASDAQ back in 1999 or so