When you start to see Robert Peston reappear on the BBC you know there must be drama afoot in the global economy and stock markets! So what is going on? Essentially, in recent months we have witnessed the bursting of a Chinese Stock market bubble. Fuelled by rampant speculation, the MSCI China Index rose by over 70% over the 12 months to May this year; in the last week of May alone 4.4 million online retail brokerage accounts were opened and Chinese investors had borrowed a record US$232 billion to invest in the market. Those excess returns have been given back with a vengeance in the last few months.
But why should this have pre-empted a much wider fall in global markets?
RMT Ref 118/08.15/AF