Volatile Market
China’s $6.8 trillion equity market roiled global investors over the last few weeks after a yearlong rally accompanied by record borrowing and surging valuations ended in a bear market.
The Shanghai Composite Index slumped more than 30 percent in four weeks through June 8, wiping out almost $4 trillion in market value. The unprecedented government intervention used to bolster the market failed to inspire confidence until last week, when regulators banned major shareholders from selling shares for six months and allowed more than half of listed firms to suspend trading.
The market collapse has challenged some investors’ long- held conviction that the Chinese authorities have a firm grip on the economy and markets and that the government is always able to achieve its goals, said Sharma.
“What happened in China last week was so significant in that for the first time, you’ve got this sign that something is out of control,” Sharma said. “Confidence damage is going to last for a while.”