Should we fear the Chinese share market crash?

The rise and fall in Chinese share prices over the past year has clearly attracted a lot of investor attention. However, the recent steep decline in share prices is not necessarily a portent of much weaker growth in the economy. In fact, the Chinese economy and the Chinese share market tend to dance to the beat of their own drums. The Chinese share market is inherently volatile. One reason for this share market volatility is that the market is not very liquid by global standards, with foreign buyers not overly active and retail investors (largely confined to domestic investors) accounting for a relatively large share of turnover. The relaxation of margin lending requirements applying to retail investors has been an important factor driving the recent upturn. According to research by the Reserve Bank of Australia, outstanding margin positions in Chinese equities more than quadrupled between July 2014 and May this year – to equal almost 9 per cent of the free float market capitalisation in China. To read more visit: (VIEW LINK)