Yesterday index futures around the world started pushing up after China announced a cut to interest rates and banking reserve requirements. That trend continues today, with stock prices in Europe and North America pushing ahead and erasing losses from the past week. China, however, is looking at a different story.
The Shanghai Composite Index fell a further 1.3% as of Wednesday morning, with almost 5 trillion in equity erased in the last week of trading. Since June, about half the value of all Chinese stocks has disappeared. Most investors agreed that the Chinese markets, both stocks and property, have been caught in an increasingly-unstable bubble, and the massive loss in equity is a reflection of that bubble bursting. This has been made worse by bad economic news; China is looking at the lowest growth rates in decades, leading investors to further question why equity prices were rising so high in the first place.
In the near term, stocks around the world are beginning to recover, but the bad news is yet from over for China.
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