By NewsGram Staff Writer
Even as the debt crisis continues to devour Greece, a financial catastrophe is wreaking havoc in the other part of the world.
In the preceding three weeks, the Chinese stock market has lost value equivalent to a jaw dropping £1.5 trillion —an amount that is almost 10 times the size of Greece’s annual GDP.
The epic fall marks the worst three weeks for Chinese stock markets since 1992.
Following a record breaking eight month period during which it reached its peak on June 12, the Shanghai Composite, an index of all stocks traded on the Chinese stock exchange, has fallen 30 per cent.
The third straight ‘Black Friday’ has seen the market crash by 3.25 per cent, falling below 4,000 for the first time since April.
Keeping in the mind the precipitous fall, China’s financial regulator has said it will investigate for suspected market manipulation.
The abnormal market movements from stock market and futures exchanges–including allegations that some overseas investors are driving prices down by short-selling Chinese stocks–will be investigated by the China Securities Regulatory Commission market (CSRC).
The China Financial Futures Exchange (CFFEX) has already suspended 19 accounts from short-selling for a month, a Reuters report noted.
Another probable reason for the sudden downfall could be the massive overvaluation of the Chinese markets, having inflated by 150 per cent in just one year.
“Shanghai’s benchmark index is expected to fall by a further 2-30 per cent over the next year”, said a Morgan Stanley senior analyst while claiming this to be the end of a cycle of growth.
Global Times, Chinese newspaper denied blaming foreign investors for the rapid fall.
“Foreign capital has only a small part of the Chinese stock market. Large-scale short selling by foreign investors in the Chinese stock market has not appeared and is an unlikely scenario”, the newspaper said.
Meanwhile, in response to the drop in the Shanghai Composite, the government has cut the cost of borrowing and eased margin lending rules, encouraging brokerages to lend money.