A Chinese businessman walks past a Bank of China branch in Beijing on Wednesday. China's stock market crash is stretching into its third week as share prices in the country's stock exchange have lost a third of their value since last month. The country's market watchdog has warned of a mood of panic about the crash, with some saying the implications are graver than the crisis in Greece. Photo by Stephen Shaver/UPI |
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BEIJING, July 8 (UPI) -- China's stock markets continued to fall precipitously on Wednesday in what regulators described as market "panic" – marked by irrational sell-offs – that one analyst has said could dwarf the crisis in Greece.
Beijing took aim at tumbling markets – a move that had little impact as the Shanghai Composite Index fell 5.9 percent and the Shenzhen Component Index was down nearly 3 percent, The Guardian reported. Within the first 10 minutes of trading on Wednesday, listed companies in both exchanges that had shed 10 percent, the daily limit, had their shares automatically suspended.
More than half the companies listed in Shanghai and Shenzhen exchanges, or 1,400, filed for a halt in trading to prevent further losses.
The vast majority, or 80 percent, of stock investors in China are small, retail speculators, some who have borrowed heavily to buy and sell equity.
South Korean news agency Yonhap reported ebullient but inexperienced brokers and investors are paying the price for the sudden downturn in China's markets.
Many were lured into quick investments after China relaxed restrictions and permitted individuals to open up to 20 accounts in their name.
Some who fell heavily into debt have committed suicide, according to Chinese press. One man in his 30s reportedly jumped from the 22nd floor of an apartment building after borrowing more than $1 million from a bank. After losing it all in a bad investment in a Chinese rail company, the man killed himself June 10 in Hunan province.
Trading on margin, or borrowed money, is expected to have extensive impact on China's falling stock markets, said Christopher Balding, a professor of economics at Peking University.
"It probably has a long way to go. Margin loans basically rose much faster, and they are not falling nearly as fast, margin debt is not falling nearly as fast as the market is falling. What that is telling us is that there is a lot of stock that needs to be sold that hasn't been sold yet," Balding told The Guardian.
China's debt now stands at $20 trillion, or 300 percent of GDP, and a downward spiral could make Greece "feel like a sideshow," said Ruchir Sharma, a financial analyst with Morgan Stanley Investment Management.
While China has been the greatest contributor to global growth this decade, Greece's economy is about the size of Bangladesh or Vietnam, Sharma said.
