The continuous Ups & Downs of the Chinese Markets seem unstoppable. In fact, despite the short-lived revival, investors woke up last week with the second biggest fall (-8.48%) in the China stock market history.
Now, contrary to other Booms & Busts, such as the Dotcom one, or even compared to the Asian Crisis in the late 19s, this time around, (and also in relation to today’s Drop Of Wisdom), the Chinese authorities can definitely blame themselves for being its “trigger“.
In fact, there is another interesting quote we could take into consideration here:
“The job of the Central Bank is to worry” – Alice Rivlin
Well it sure seems as though the Chinese are taking their a job a little too seriously. Although being used the occasional QE and rate cutting, the Chinese have taken it one step further resorting to unprecedented measures, from loosening collateral and margin lending rules to banning short-selling, in order to fuel the “Wealth Effect” generated by the market rise.
In an article about China I wrote about 2 weeks ago, at The Market Mogul (The Good, Bad & Ugly of China’s Markets), I also address the issue of the Authorities, and conclude in a way that is as true today as it was then:
However, the biggest conundrum is the following: what happens when they run out of available counter measures, and cannot control swings anymore, up to the point where investors’ “animal spirits” finally overwhelm Beijing best efforts. If there is one thing we can be sure about is that sustained volatility can be expected going forward.
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