Start looking at Chinese financial markets – they give the first warnings of stock market weakness in Europe and the UK
We used to look to Wall Street. Things have changed
What happens in China affects the world. It may not be as important as the US – yet. But if you are wondering about the trigger for the current stock market weakness in the UK, Europe and to a lesser extent the US, start looking there.
Back in January the most important index, the Shanghai Composite, hit a two-year peak. Since then it has fallen by 27 per cent. The smaller company Shenzhen, which has been more volatile, has fallen by 34 per cent in the same period. Last Friday the collapse of prices had become so serious that the three most senior financial officials in the country intervened with statements of support.
The governor of the central bank, the People’s Bank of China, Yi Gang, the chairman of the China Securities Regulatory Commission, Liu Shiyu, and the head of the newly merged banking and insurance regular, Guo Shuqing, all made various policy changes designed to underpin share prices. These are three of the top dozen of the Chinese oligarchy that runs the country. All are thoughtful, measured and competent.
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