China, not Greece, should be the biggest concern for investors
China’s stock market crash must act as a wake-up call for investors to urgently reassess their portfolios, warns Nigel Green, founder and CEO of deVere Group.
Much of the world’s attention is on Greece right now. Whilst it is right that investors keep a close eye on the Greek saga, one eye must remain firmly on the burgeoning crisis in China.
The Chinese stock market’s downward spiral enters its third week, with share prices losing 30 per cent of their value since the middle of June.
With the Chinese stock market losing a third of its value since mid June, which is about equivalent to the UK’s entire economic output last year, or in other terms the GDP of Greece every two days for the last 10 days, this has all the makings of morphing into a major financial crisis.
China’s government and regulators appear to be pulling out all the stops to support share prices – including a defacto suspension of new listings and interest rates being cut to new record lows – although investors seem to be unconvinced that this will help.
Despite few foreign investors having much exposure to the Chinese stock markets, the meltdown matters.
Indeed, it is hugely significant because it will send shock waves throughout global capital markets, not least because China is the world’s second largest economy and one of the largest consumers of commodities and other goods sold by other countries.