Free stocks from $10-trillion roller-coaster
Updated: 2015-07-04 09:35
By Zhu Qiwen(China Daily)
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Both the volatility and the three-week index dive in Chinese stock markets have been beyond the wildest imagination of most investors and should prompt the country's policymakers to take immediate and effective measures to preempt panic in the stock market. But while doing so, they should be careful not to mislead investors with the impression that the government is out to boost share prices at any cost.
With the benchmark Shanghai Composite Index closing at 3,686.92 points on Friday, the Chinese stock market has plummeted by nearly 29 percent over the past three weeks. This decline is in sharp contrast to a year of spectacular gains that inflated its total value to more than $10 trillion in June, roughly the size of the country's gross domestic product in 2014.
Given the huge size of the Chinese stock market, it is more than obvious that the country's securities watchdog must take action to prevent an overdue market correction from spiraling out of control and causing irremediable damage to not only the stock market but also the real economy.
Since the People's Bank of China cut interest rates last weekend the Chinese authorities have come up with a slew of measures that are apparently meant to bolster sentiments in order to arrest the steep fall of the stock market from its periodical peak on June 12.
Some measures like the plan to allow the country's pension fund to invest in equities is of long-term significance to the healthy expansion of the stock market. Other measures like relaxing collateral rules on margin lending and efforts to crack down on stock market manipulation are supposed to deliver immediate results and help arrest the decline.
Unfortunately, the slide of the stock market over the past week indicates that investors have not yet responded well to these positive developments.
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