Chinese Stock Rally Over

Chinese Stock Rally Over

over 3 years ago2 mins

The Chinese government threw cold water on the stock market’s eight-day hot streak on Friday, after two of its own investment funds announced plans to sell, sell, sell 💦

What does this mean?

It’s good practice to lock in your profits from successful investments when you rebalance your portfolio. But if you happen to be an investment fund backed by the Chinese government – known for buying and selling on its say-so – then that “good practice” can have unintended consequences.

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Chinese stocks added about $1 trillion in value last week after the government encouraged investors to buy the country’s shares 🇨🇳 But at the same time as some analysts were cautioning that stocks had risen too far, too fast, the government – keen to avoid a boom-and-bust cycle – published an article warning against a “crazy” bull market on Friday. And for individual investors who had piled in based on earlier advice, the rapid selloff that followed could’ve hurt…

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Why should I care?

Short-term investors might’ve felt the impact more than most, given that they rely on quick and continuous rises. For them – and for you – this whole brouhaha highlights just how important it is to do your homework before buying or selling, rather than doing what someone else tells you to 🤓 For long-term investors, though, Friday’s selloff will probably just be a blip in the context of typically upward-trending markets. That might be why long-term investors – who take the time to understand company fundamentals before buying a stock – tend to do best.

International funds followed local investors’ lead and sold Chinese shares overall for the first time this month on Friday 🌎 But their reasons might’ve been different: they may be anticipating more trouble ahead for the country’s companies after the US sanctioned four Chinese government officials on Thursday, and wanted to limit their investments’ exposure to any fallout.

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