A reminder: China's stock market is a clown show

[mahatmakanejeeves]

A reminder: China's stock market is a clown show

By Michael Hiltzik
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The Economy Hub

January 7, 2016, 8:54 AM

Just as "bad cases make bad law," to cite the ancient legal adage, bad stock markets make for bad investment decisions. China's stock market, with its repeated crashes, has the entire world in a tizzy.

The Shanghai stock exchange experienced its shortest trading day ever on Wednesday, as circuit breakers designed to end trading if the market slid 7% kicked in after only 14 minutes of active trading. As my colleague Julie Makinen reports, Shanghai Composite has dropped about 12% this year, and the Shenzhen composite has fallen more than 15%.

The world should take a deep breath. The China stock market meets the definition of a bad stock market.

[elleng]

1. Yes it does,

new and lacking experience, and the world holds its/our breath.

[EdwardBernays]

2. All stock markets are a clown show

Ours is just rigged videopoker.

[Proserpina]

3. Doesn't matter what you call it, it's going to kill the global economy

[Warpy]

4. It's also overwhelmingly owned by small investors

which makes it particularly vulnerable to panic. That hasn't happened yet, most Chinese are philosophical about this even if their own investments have evaporated. They knew there was a huge investment bubble and they knew it was going to pop at some point.

That could change if it starts to shut down every day.

ETA: BBC reports that China is suspending the "circuit breaker" for tomorrow. It should be fascinating to see just how bad it gets, or whether it starts to rally a bit when bargain hunters come out.

[RandySF]

5. I respectfully disagree on one point

The Chinese government is in a panic because they fear losing face with the rest of the business world, so they've been throwing the kitchen sink at it and making things worse. Investors are panicking because a lot of them BORROWED MONEY to buy the stock. So now we have a shit show of people at the top and bottom who don't know what they're doing.