China stocks jump again after Beijing put floor under market

The market turmoil may also prove a setback for Beijing’s lobbying for Chinese shares to be included in global indices such as MSCI’s Emerging Markets Index, which would draw in foreign capital. However it’s unlikely to seriously affect USA investors because they have limited involvement in China’s largely hermetic markets.

“The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors”, European Union President Donald Tusk told reporters.

If everything is directed from above, it will be hard for China’s middle-earners – the people most likely to spearhead a production economy by creating businesses at home – to be truly innovative.

China stocks rebounded Thursday as Beijing instituted further stimulus measures.

In neither case are USA investors terribly exposed, at least directly.

Representatives from the European Commission, European Central Bank and worldwide Monetary Fund are assessing the proposals. The CBOE Volatility Index, which measures expectations for future swings in the S&P 500, in recent sessions rose to its highest level since the end of January.

But with China’s booming upper and middle classes stretched far and wide in their search for profitable investments, like Manhattan condos and luxury art, sudden plunges in wealth are sure to have ripple effects worldwide.

The benchmark is still up 82 per cent in the past year, the most among the world’s major markets. But the foreign investors China has been trying to attract may find these heavy-handed market interventions unsettling. On the ChiNext, a Nasdaq-like board with small-caps, only 205 stocks traded while 279 were suspended as of Friday.

The Shanghai Composite ended up 4.5% at 3877.80, though the index is off 24.9% from its June high. This unhinged bull market was fueled by an enormous increase in the number of investors buying on margin, which simply means borrowing cash from a broker in order to purchase stock. According to Bloomberg, leverage ballooned by a factor of five in that time. “The impact on the market remains muted and so more resources will probably be ramped up for the battle in the coming days”.

“The stock market disaster was a cruel lesson for us new entrants”, he said, cautiously optimistic about the outlook in the long run. Tencent CEO Pony Massachusetts and Dalian Wanda Group Chairman Wang Jianlin lost $1.2 billion and $6.5 billion respectively (Forbes has a list here).

As the market tumbles, so do the investments of 90 million savers. “Over the past year the Chinese stock market has, after being in the doldrums for several years, rocketed and more than doubled”.

The Chinese stock market boom does in no way reflect the real economy of the country.

China’s stocks might have been the most obvious bubble ever, and now that it’s burst the government is doing everything it can to keep it from deflating any more. Moreover, only about 15 percent of the Chinese population owns individual shares. The Dow Jones industrial average climbed 230 points, or 1.3 percent, to 17,777. One analyst said that the price of a ton of steel in China had dropped below that of a ton of cabbage.

“Indeed, given that the stock market didn’t provide any noticeable boost to spending on the way up, there is no reason to expect it to be a drag on the way down”, he wrote. China has already been decelerating from blistering 20 percent growth rates as recently as 2011. (These P/E ratios are as of late May/early June, before the market correction began.).

In 2008, Stephen Harper gave a now-famous interview with Peter Mansbridge at the height of the financial crisis, in which he suggested the market sell-off presented an “excellent buying opportunity” for investors.