Famous floor trader, analyst and author of the list of books on financial markets Tom Demark drew a parallel between the current Chinese equity market disruption and wreck of American share indexes, which happened in 1929, and started the Great Depression in the USA.
In his interview, Demark announced that he is waiting for further drop in the Chinese equity market. According to his prognosis, in the next three weeks Shanghai Composite index will lose 14%, falling to 3 200 points.
After the implementation of this scenario, the total falling of Shanghai Composite since 12.06.15, when index reached the maximum point for the last 7 years, will be equal to 38%. Moreover, Shanghai Composite dynamics, starting with the March of 2015 correlates with the behavior of the American Dow Jones in 1929, when index decreased almost 48%.
Chinese authorities are taking active measures for stabilization of the equity market. Namely, bidding of more than 1,4 thous companies were stopped and primary stock promotions were also put in hold. China Securities Finance government enterprise, received funding equal to 2,5-3 trn yuan in order to provide liquidity and support of the leading companies.
However they cannot manage to stop the market meltdown. On Monday, July 27th , Shanghai Composite decreased 8,5%, and showed the maximum daily decrease since 2007.
The remarkable thing is that since the November of 2014 to the middle of June of 2015 showed the fast growth on approximately 150%, which led to the formation of the “bobble”. Similar situation was in the USA in 1929. Then on 24th of October, which sooner was called the “black Thursday”, happened the flash crash of stocks, after the formation of the financial “bobble”.
Earlier it has been reported that meltdown of Chinese equity market became the subject matter of the investigation of the competent authorities of Peoples Republic of China.
On the page of the committee in the Weibo social network was released the information about the start of examination of regulations compliance of Shanghai Mingchuang Software Technology Ltd и Zhejiang Hexin Tonghuashun Network Information Ltd trading platforms.
However, the comparisons were dedicated to the conduct of Chinese and US authorities in the course of the fund crisis. Against the background of the continuation of the meltdown this parallels are becoming more fateful both for the China and global economy in general.
