China Might Take A Cue From 2015 To Revive Its Struggling Stock Market

China Might Take A Cue From 2015 To Revive Its Struggling Stock Market
Paul Allison, CFA

16 days ago2 mins

What’s going on here?

China appeared to plan a major intervention to rediscover the stock market’s former glory, but the world’s second-biggest economy will need to learn from its mistakes.

What does this mean?

China’s president has some to-do list: remedy rising unemployment, sell more exports, fix the crumbling property market – not to mention taking a lunch break. But this week, the small issue of supporting the disastrous stock market landed on his desk, too. Stock market regulators have already emptied their bags of tricks to no avail, including stopping investors from betting against the market. So when word spread that the president was set to meet with regulators on Tuesday, many wondered whether the country might throw it back to 2015. Back then, the government bought shares in around 1,000 firms to make the lackluster market look a little more, well, lustrous.

China’s stocks slump

Why should I care?

For markets: Déjà boo!

If that is China’s plan, it’s a risky one. Naturally, investors will cast an eye over any stock that’s suddenly pulling ahead – but they’ll quickly move their gaze to the company’s books. Potential investors will steer clear unless the firm’s profit and projections justify the new higher price, and existing investors may well sell their shares and pocket the profit. That’s why the thought of returning to 2015 could make many investors feel more nauseous than nostalgic: China’s market collapsed soon after the government poked its nose in, only reaching its lowest level in February 2016.

The bigger picture: You’re not guaranteed tomorrow.

Thing is, China’s stock market could take a turn for the worse no matter the government’s tactic. So for investors who still believe in the country’s long-term potential, or for those who just can’t resist a bargain, it’s tempting to hold out for even cheaper prices. That’s a precarious place to be, though: you can only see the market’s lowest point once it’s gone.

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG