Chinese stocks are plunging in spite of government’s efforts. The government has stepped up coming up with a number of measures to help up the stock but apparently it’s not working too well. This is going to affect the political and economic scenario of the country. Many investors have put their savings in the market and China will lose customer confidence if thing did not get better.
The government is going overboard to prevent any wide spread plunge in the stocks. The central bank is providing extra cash for purchasing shares. The brokerage house are also providing money to boost the sale of shares.
In the market there are only sellers and no buyers. That is why the government is buying to create an equilibrium in the market. But the problems is that they haven’t found the right method. The shares fell in Shanghai by 5.9 %. The problem is also spreading to other regions. The shares prices also fell in Japan and Hong Kong.
This scenario may create selling trend in Chinese market. In China if the shares fall for more than ten percent a day, the investors tend to sell these shares. The next day they sell another share which isn’t performing well. This does not help in any way instead it delays making things right.
The Chinese market have suffered many ups and downs over the years. But it’s a different scenario now. Chinese economy has been slow. The stock market is greater in size than before. It is second only to American market.
Many of the investors have bought stocks with borrowed money. Another reason of the panic created due to declining stocks is debt. There was a peak in market at the start of June. The shares were really expensive and the investors had to pay a large premium to buy the shares.
However, the decline in market has no affected the overall gains because the government companies have been doing well. But the situation isn’t very optimistic. Initial Public offerings have been halted and a big fund is being arranged to facilitate buying. These measures are used as a trial and if they didn’t work other measures will be introduced soon.