CHINA BUBBLE
China's stock market boom has reached outright mania, with equities galloping higher at a parabolic rate, despite threats of a crackdown by regulators and the continued slowdown of the national economy.
The Shanghai Composite Index has risen 32% in the past six weeks, blowing through 3,000 to a three-and-a-half-year high even though corporate earnings are declining steeply.
The China Securities Regulatory Commission said late last week that it would "increase market supervision, resolutely crack down and earnestly safeguard normal market order." It warned that stock manipulators had been "raising their head" and would be dealt with.
The cautionary words have been ignored by retail investors as they throng brokerage offices, lured by momentum trades. For the stock boom comes as Chinese industry battles with massive overcapacity in everything from steel to shipbuilding, coal output, cement and solar panels.
The bottom line is that it may be impossible for China to deflate its epic bubble painlessly.
