It was another turbulent day on the Chinese stock market on Wednesday. For a third day in a row, stocks tumbled as the government tried unsuccessfully to prop up the market.
Reporting from Beijing, NPR’s Anthony Kuhn reports that over the past three weeks, the markets have lost some $4 trillion.
“Today, the Shanghai and Shenzhen markets fell by 5.9 percent and 2.9 percent, respectively, even as the government gave brokerages more money to buy up stocks. Nearly half of listed companies halted trading to try to wait out the market turbulence.
“Beijing University finance professor Michael Pettis says the current rout highlights the speculative nature of China’s markets. He says they’re speculative because investors lack reliable information on certain things:
” ‘High-quality macroeconomic data, high-quality financial statements; a clear understanding of what managers are supposed to do — corporate governance — and they need to know that the rules are stable,’ Pettis said.
“Without that information, Pettis says, it’s hard for investors to calculate what companies are worth and how they’ll perform in future.”
Much of the talk on this side of the world has been about the possibility of contagion and also what exactly all these interventions by the Chinese government mean.
“The trading suspensions, which cast doubt on authorities’ pledge to give markets a greater role in the world’s second-largest economy, mean that the Shanghai Composite’s drop was probably understated.
” ‘It’s absurd, stopping trading just because they don’t want stocks to fall,’ said Tsutomu Yamada, a market analyst at Kabu.com Securities Co. in Tokyo. ‘They’re going all out in trying to stop stocks from falling but it’s not working.’ …
“Leshi Internet Information & Technology (Beijing) Co., the biggest company in the ChiNext index of small-cap stocks, was suspended after plunging 42 percent from a record high two months ago. The company, which soared five-fold in the year through May, said in a statement that it plans to invest in a smart terminal.”