China’s stock market woes continue

The head of China’s securities watchdog, Yi Huiman, was unceremoniously fired, becoming the latest casualty in a series of government officials losing their jobs during times of plummeting stock prices. The situation is dire, with over $1 trillion in market value wiped out, and the index down by more than a fifth since early 2022.

The economic slump is largely due to the troubling state of China’s property market. House prices and sales have been plummeting, leaving government rescue plans looking inadequate. This economic downturn has cast a pessimistic cloud over the market, with bearishness towards China’s outlook rated very low.

The stock market crash has sparked public fury, with over 200 million Chinese people owning stocks. Social-media warriors have directed their anger towards government officials and media personalities, showing the potential for backlash.

Global investors once loved Chinese stocks but have been fleeing due to zero-covid policies, among other issues. Daily sell-offs have forced experienced foreign investors to close shop, and a significant recovery isn’t in sight.

The regulatory response to the market instability has been unsettling for fund managers. There is hope for a state bail-out fund post the Chinese New Year holiday, but investors are skeptical about the efficiency of such measures. The government’s long-term reform plan includes shifting focus from capital-raising to protecting average investors, while also boosting the market value of state-owned enterprises.

As China’s stock market cycle repeats, officials are met with skepticism from investors due to past experiences. The proposed reform plans will require acceptance from both Chinese and foreign investors, as they remember previous attempts and are cautious about the potential outcomes.

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