Fall of Chinese stock markets, what should we remember?

Since June 2015, prices have been falling on Chinese stock exchanges. Faced with this situation, many analysts predict a new economic crisis in the near future, on a global scale. Update on the situation.

Series of falls then slight rebound…

The second half of 2015 was marked by a series of falls in stock market indices on the Chinese stock markets. Since June, prices have fallen by around 40%. And the year 2016 started with a further 10% decline. Decrease following the revelation of poor results regarding industrial production in the country. During the first 2 – 3 weeks of January 2016, the decrease continued. Nevertheless, some rebounds were still observed in the third week. Although overall trends remain fragile, the CSI 300 index, which includes China’s leading companies, and the Shanghai composite index each increased by around 2 – 3%. The question is how things will evolve in the medium and long term.

Various measures taken In response to

the rather worrying situation, various measures have been taken by the Chinese government. In particular, the authorities have required public banks to purchase securities in order to curb the fall in prices. For their part, large investors were ordered not to sell any more shares (this provision was made in the summer of 2015). There was also the “circuit breaker”, an operation that consists of stopping transactions for a quarter of an hour in the event of a drop of up to 5% and for a day if the drop exceeds 7%. It should also be noted that this solution may have had negative repercussions. The efforts made by the government undoubtedly have an impact: they prevent the speculative bubble from bursting suddenly, revealing the real economic situation in the country. But it is also possible that investors will get bored, overwhelmed by doubts.

Declining yuan exchange rate: is this “the” solution?

Faced with a situation that does not seem to have a break, the Chinese government could finally find itself forced to make a significant depreciation of the local currency (the yuan). In any case, regular (but not significant) decreases have already been observed since 2016. In January 2016, the Chinese currency posted a record low exchange rate: the lowest since 2011, and you want to take advantage of this situation by trading the Yuan? Use one of our regulated Forex brokers