European markets rose sharply on Friday.
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“But in general it has started to rebound with blue-chip companies more resilient than small company stocks, which will help stabilise the market”, he said.
For example, short sellers have been threatened with arrest, various deep-pocketed government institutions have promised to buy shares on the market, and over a thousand companies have had trading in their shares suspended, simply to prevent the sell-off.
Since June 12, the Shanghai Composite has lost roughly 30 percent.
There have been signs of overheating in China for a while. The government wants to nudge the economy toward slower but steadier growth based on spending by Chinese consumers.
The stock market boom was also fueled by debt as people have been buying stocks with borrowed money- a practice which is called ‘margin trading’.
Chief Executive Leung Chun-ying, however, lauded the city’s management of the crisis, when asked about the proposed Shenzhen-Hong Kong Stock Connect.
The Chinese stock market has been experiencing a sharp fall after a year of mad zeniths.
Many investors, who bought the stocks past year or earlier, have seen the value of their stocks rise by more than a hundred percent.
Chinese regulators issued a new ruling on Wednesday prohibiting stockholders who own more than five percent shares in a corporation from selling them within the next six months.
One reason being the Chinese government is determined to make sure the slump won’t get any worse.
Several commodities have weakened amid concern that China’s stock sell-off is illuminating deeper economic problems. The Hang Seng China Enterprises Index, which tracks Hong Kong-listed Chinese companies, now trades at 8.2 times projected profits, compared with 15.6 in Shanghai. “And the drop in USA stocks could spark a buying opportunity”, said CNN’s Alison Kosik. Chinese markets have been rife with investor loans and many saw shares as overvalued, so some believe that the rapid decline has been a effect of an overinflated market.
These apparently uncoordinated tightenings jointly sparked worries that contributed to the stock market crash.
China’s government is frantically trying to halt the drop, implementing drastic measures that include banning shareholders with large amounts of stock from selling, Reuters reports.
Analysts say the economy is unlikely to take a big hit.
The country’s cabinet said on Wednesday it planned to spend 250 billion yuan ($40.3 billion) to foster growth in areas of the economy most in need of support and would accelerate construction of big public services projects.
China’s insurance companies purchased shares and stock funds in a show of confidence, the insurance regulator said.
Her experience illustrates how China’s novice investors tend to be the biggest losers in the event of a market meltdown.
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The benchmark is still up 82 per cent in the past year, the most among the world’s major markets.
