Tag: China

Deja-Vu Chinese market plunge

China surprised the markets today by speeding up the devaluation of the yuan to its lowest level in nearly five years. According to experts, devaluation is seen as the last resort to boost China’s exports. Due to this, China’s stock market sank, and triggered the recently installed circuit breaker which halts the markets for 15 minutes after a 5% decline, and shuts down the day’s trading at 7% decline. And thus, China saw its second stock market crash in a week! Today may also be the shortest trading day for China as the trading halted after just 30 minutes of opening.

This has caused the nervousness amongst the investors. According to Christopher Balding, a professor of finance and economics at Peking University’s HSBC Business School, Chinese stock market is very much over valued and in order to get a reasonable valuation, we should be looking at a significant fall. Considering the actions of the Government, (shutting down the trading at just 7% decline whereas, a comparatively stable U.S. market has a 20% threshold) it is less likely that the government would allow a significant fall which would give a reasonable valuation.

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Chinese market hits a new low. Trading halts, automatically

The manufacturing sector is the most important one in the Chinese Economy. After improving for two months, a survey conducted by Chinese media group Caixin showed that PMI fell to 48.2 in December from 48.6 the previous month. Any number below 50 represents a deceleration in the factory sector. Due to this, there was a 7% fall in the market which triggered a halt.

However, economists said the new manufacturing data, while disappointing, does not indicate that China is facing a severe or unexpected economic slowdown.

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When Everything Goes Right, It’s Too Late To Invest

There are those quintessential “happy” days the stock market sees, sometimes – stable Dollar, positive economic indicators, bullish stocks stay on course, previously bearish stocks don’t fall as much. This, certainly, doesn’t happen often but every now and then there are such days – the worst of days to start investing! “You have to buy when others are panicking,” said Jim Cramer of Mad Money, recently.

When it all goes right, stock prices saturate faster, there are fewer undervalued stocks in the short/medium term and most trading peers feel that the market Is going to self-correct soon.

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