China’s stock market ‘bubble’ was fueled by “speculative mania” which has proven to have had grave implications of the global stock markets. The collapse of this “speculative mania” will have far reaching ramifications on our current global stock markets. This indicates that Central Bank interventions cannot alter market cycles.
Chinese exports have seen their sharpest drop in almost seven years which is adding to concerns of the health of the worlds’ second largest economy. Exports have dropped sharply, by 25.4%, from the previous year, while imports fell 13.8%. This weak data comes on the heels of Beijing registering their ‘ slowest economic growth in 25 years’.
The Chinese stock markets have been the most interesting financial news story occurring in 2015. The worlds’ second largest economy and its’ stock markets were soaring in The Shanghai Stock Exchange Composite Index, (SSEC), which is the equivalent of the U.S. SPX.
These gains were the equivalent of trillions of dollars of wealth for Chinese stock investors. China’s markets are dominated by retail investors. Working class Chinese people account for over 5/6ths of all of the national stock market transactions.
The China’s soaring stock market
Their overwhelming desire and pressure from their peers has led them to aggressively buy stocks. This has gone far beyond normal investing and reached extremes of “herd mentality”. The Chinese people who hadnever before invested in stocks, scrambled to open brokerage accounts. They were in over their heads seeking to establish upward social mobility and financial success.
This was “dumb money” which fueled the popular ‘speculative mania’ in Chinese stocks. The working class people did not have the proper experience nor education of the workings of their financial markets. This HUGE STOCK MARKET crash happening has wiped many peoples finances out. It lured in many ‘novice traders’ who have since quit their jobs, and put all of their lifesavings into the markets in hopes of making themselves rich. However, matters have gone terribly wrong for these investors recently, as they do not understand what they are doing!
