China going 'all in' on stocks
The mystery isn't why Chinese stocks have fallen so far, it's why the government is so desperate to prop up shares.
Dow Jones reports that China's government will increase stock market purchases. Earlier, Reuters reported that China had already spent the equivalent of 515 billion pounds (!) to boost stocks.
Those numbers are estimates because the true figures aren't available. One of the reasons the market dropped 8.5% today was a report that the China Securities Finance Corp was considering cutting back buying.
All the headlines surrounding China scream about 'meltdowns' but the chart of the last year strikes me as entirely 'normal'. That kind of loss in a day is certainly traumatic but there are very few markets in history that can rally as quickly as China without a deep correction at some point.
Despite the volatility, the Shanghai Composite is still up 81% over the past 12 months.
The first question is: Why hit the panic button? Let it fall and then help pick up the pieces.
The second is: If they're panicking about a little stock market dip, what else are they hiding?
That second question is much more worrisome than a violent dip in shares.
Ultimately, I think traders are far too worried about stocks in China. Officials there are betting everything on being able to keep stocks higher. I'm not sure why they're so desperate but I sure won't be fighting them.
