China stock market rally that lured so many investors has turned into a plunge. Chinese stocks are crashing. Trillions of dollars invested have been wiped out. “At the moment there is a mood of panic in the market and a large increase in irrational dumping of shares, causing a strain of liquidity in the stock market,” China Securities Regulatory Commission said in statement.
This statement reminds of the Stock Market Crash 0f 1929. In 1929 panic selling started. Everyone started to sell with no one willing to buy.
Chinese authorities may be scrambling to halt the stampede out of the country’s stock market and shore up confidence, but retail investors – a group that makes up around 80 percent of the market – appear to have already lost heart in equities.
Watch this video that discuss: Has the hard landing in China already started?
Now back to the present stock market rout. When the panic sets in, there is no looking back. Everyone wants to sell. No one wants to buy. China is the second biggest economy in the world. China is the biggest lender to the US consumers. So what happens in China ripples across the world.
The rout rippled across global markets, dragging down U.S. index futures and fueling gains in haven assets such as the yen. Policy makers’ latest attempts to stop the selling, including measures to prop up small-cap stocks, were overshadowed by data showing an unprecedented liquidation of margin trades on Tuesday. Foreign investors extended a record three-day exodus as some said government meddling is making matters worse.
“There’s really panic out there,” said Tony Chu, a Hong Kong-based money manager at RS Investment Management Co., which oversees more than $20 billion. “I wouldn’t suggest catching the falling knife.”