Chinese Stocks Dip Alarmingly after Worst Week in Nearly a Decade
Kwao Peppeh | | Jun 20, 2015 07:00 AM EDT |
(Photo : Photo by ChinaFotoPress/ChinaFotoPress via Getty Images) A new survey has revealed that investor confidence may once again be returning to China's stock market after a rapid fall in prices in recent months.
China's stock market suffered a terrible run this past week that saw the Shanghai Composite Index fall by up to 13 percent and the Shenzhen Composite Index drop by nearly the same figure.
The plunge was most notable on Friday when the Shanghai and Shenzhen stock index dropped by 6.4 percent and 5.9 percent respectively, to end the week at 4,478.36 and 2,742.18. The loss was felt in nearly 1,000 stocks from companies in diverse areas, particularly industrial companies.
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Experts say this is the worst run that China's stock market has experienced since the 2008/09 financial crisis, but it is unclear where to place blame at the moment.
Some experts have pointed out that the country's rapidly developing stock market is a bubble that could easily burst. Nonetheless, the stock market has repeatedly defied economic sense by quickly picking up pace whenever it slowed down. CNN explains that China's stock market is being sustained by "government stimulus and investor frenzy."
Recently, CNBC reported on a local farming village in China where the locals have turned to the stock market to make a living. Experts say the growth of unsophisticated investors is likely to promote margin buying and the accumulation of debts.
But prior to this week, the market has not shown much signs of an impending stock decline. The Shanghai Composite and the Shenzhen Composite had actually increased by 38.4 percent and 93.8 percent respectively since the beginning of the year, according to Investor's Business Daily.
Another reason that could possibly explain the performance of Chinese stocks this past week is the fact that more than two dozen companies have shored up resources in preparation for their initial public offering. According to the New York Times, a record amount of up to $810 million (5 billion yuan) has been temporarily locked up.
While it is clear that China's stock market is set for correction, some pundits question whether the plunge has come to an end.
TagsChinese Stocks Plunge, Shenzhen Composite Index, Shanghai Composite Index
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