China’s Stock Slump Widens as Stimulus Fails to Calm Investors

Monday, June 29, 2015
By Paul Martin

The decline in Chinese stocks continued on Monday amidst wild volatility, indicating the nation’s 935-day bull market is over and the bubble might have popped.

Kristian Rouz — The ongoing slump in mainland China’s stocks deepened during Monday’s trading, even though a full-scale monetary stimulus came into effect yesterday, providing the investment-starved market with extra money liquidity.

As the bear market advances, capital flight from the mainland has exacerbated, meaning the liquidity released by the People’s Bank of China (PBoC) to support domestic market ends up in the overseas bourses, adding to speculative upward pressure there.

PBoC obviously failed to restore investors’ confidence and prevent the overheated stocks from collapsing. The Shanghai Composite Index shed another 3.3% to 4,053.03 points by the day’s end, extending the 20% losses of the previous two weeks.
The index hit its highest on 12 June, standing at 120% higher than a year prior to that. Volatility was extremely rife in the index today as it swung between losses of 7.6% and gains of 2.5% — the greatest one-day gap since 1992. Tech shares lost 7.3% on the average, leading the retreat.

The mainland’s historical longest bull market has come to an end effectively with capital fleeing China at an accelerated pace, while the real economy is ever staggering. One of the PBoC stimulus moves on Sunday was aimed at stabilizing the market situation, but the mad fluctuations showcased today suggested that Beijing’s plan failed.

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