Shares in China fell this week after the Communist Party announced that the country’s economic growth trend will be an “L-shaped” one
Traders believe that the Chinese economy will recover in an “L-shaped” growth, rather than “U-shaped” or “V-shaped”, as the Shanghai Composite Index and the Shenzhen Composite Index went down by 2.8% and 3.6% respectively on Monday.
The report from the Communist Party backs up the general opinion.
“The report suggests to us that future policy easing may be more cautious and that the government may try to hasten the pace of reforms, thus reinforcing our view that the debt-fueled rebound in investment growth will be short-lived,” Nomura analyst Yang Zhao declared.
Consequently, investors in China keep their eye on the most profitable businesses. Some of them plunge shares by 10%, the maximum daily limit officially allowed. Other mix shares, as the U.S. jobs platform was weaker than presented at the end of last weak, despite release of alarming Chinese economic data.
Meanwhile, the country’s foreign-exchange reserves have increased to $3.220 trillion, showing a strengthening of the yen against the dollar.
Nevertheless, “high leverage will lead to high risk” and “if not well controlled, [the situation] will lead to systemic financial crisis and negative growth,” the report quoted.
