The latest China’s stock market slump coincided with the two-day G20 summit in Shanghai. Shares in China plunged ahead of the assembly of G20 finance ministers and central bankers, who aimed to discuss recent markets turmoil. Shanghai Composite, the main stock market index, plummeted 6% in one trading day hitting a fresh 15-month low. Later, it managed to regain some losses and rose to the level it traded in November 2014. In other words, the robust development of China’s equity market in the first half of 2015 belongs to history.
Discouraged by such “roller coaster” dynamic, China’s retail investors have to seek alternative assets. Experts think that at present private investors could consider real estate to be a safe-haven asset. It means they could opt for investments in the real estate market. However, the Chinese leadership declares its intentions to pursue the strategy of administrative measures. The monetary authorities do not assume responsibility for extreme volatility in domestic markets, in particular the currency market. According to Beijing stance, mass media and rumors are to blame for the stock market collapse as retail investors tend to act in “herds”.
Lou Jiwei, China’s Finance Minister, said Beijing does not put devaluation of the renminbi on the agenda. The policy maker added that rumors about further devaluation of the yuan are being spread by news agencies. The People’s Bank of China slashed the yuan’s value in August 2015. Besides, a new round of devaluation was carried out in early 2016. The yuan’s forex rate was cut by 1.5%. Nowadays, the renminbi is falling in value amid investors’ discontent with China’s economy and capital outflow. However, the PBOC does not have market-based tools to reassure investors.
