An article from the british newspaper The Independent, published on April 23, deals with the financial bubble burst in China which started last October, and which affected the CSI 300, the leading indice of the Shenzhen and the Shangai stock exchanges. This market decline is described by the commentator as the most severe since the record reached by the CSI 300 in mid-October 2007.

The shock was hard for investors of the Shangai stock exchange, as a majority of them are retail investors, that is to say, individual investors who purchased small amounts of securities. Many Chinese people had invested much of their personal assets to buy stocks and take advantage of the financial positive trend. The commentator further explains (this may be directly linked to small investors' inexpertise) that lack of diversification of portfolios for a majority of investors could just make the strike more painful.

As a response to the decline, the Chinese Government lowered the tax on securities transactions from 0,3% to 0,1% on April 24 (that was already its level in May 2007, before the same Government decided to raise it to 0,3% to cool down what was considered as an overheated market at the time). The decision was greatly appreciated by investors at large, since the CIS 300 went up by almost 10% on the same day. But for experts, this governmental intervention will only have a positive impact on the short term.

To read the analysis from The Independent, written before the Chinese Government intervention, follow the link below:

http://www.independent.co.uk/news/business/analysis-and-features/chinas-bubble-bursts-814073.html

Tina Wetchy