CHINESE investors had a rare opportunity for good cheer on Wednesday February 27th. The country’s two stock exchanges shrugged off Monday’s blues, when both indices dropped by about 4%, and gained a bit instead. Unfortunately Monday is far more typical of trading conditions in recent months in the country’s two markets, in Shanghai and Shenzhen. Despite the power of China’s interventionist government, the importance of maintaining appearances for the Olympics and the country’s relatively strong economic growth, China’s stockmarkets have been suffering from a protracted slide.
Shanghai is already down by more than a third since October last year. A fall of this severity, had it happened elsewhere, would have already prompted the word “crash” to circulate. But the collapse has sent out few tremors and little nervous talk. There are several reasons why this is so. Foremost, foreign participation in the Chinese market has been strictly curtailed. As a result global losses are limited and so news of the financial destruction that has accompanied the massive share-price losses has failed to stir interest beyond the country’s borders.
Almost exactly a year ago, the US market took a big hit that was blamed on a drop in the Chinese market. At the time, I said the two were unrelated; it would seem I was right. I wonder why this hasn't gotten more press?