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China is pushing the panic button… hard.
Bloomberg reports Beijing halted trading on at least 1,323 Chinese companies. These businesses amount to around $3 trillion in total market capitalization. That’s about half of the country’s current equity market cap.
The trading freeze is China’s latest attempt to stop its equity markets’ hemorrhaging. They’ve lost about $3.2 trillion in value over the last three weeks. (India’s entire gross domestic product (GDP) is $2.7 trillion.) We discuss the details of China’s market interventions here and here.
The latest move reveals the abject fear gripping the Chinese government. With 1.3 billion people in China—people who riot when they lose everything—the government is taking extraordinary steps to prevent further slides.
It’s only making things worse…
Prices no longer represent real corporate value. Those who wish to sell their shares cannot. And companies the government has picked to try to contain the market slide have seen their shares soar.
PetroChina—China’s No. 1 oil and gas producer—just became the world’s second-largest company by market cap… even though the company has tracked the markets’ broad moves over most of its existence.
The wild market distortions continue to pummel China’s 90 million individual investors. The number of households showing stock market gains dropped from 73.8% to 40.5% in one week… with nothing but more chaos in sight.
Bottom line: The stock market of the world’s second-largest economy is in serious trouble. Expect more fallout to come. U.S. markets have managed to shrug off much of the volatility elsewhere around the globe… but we don’t know how long that may last.
Put yourself in a Chinese investor’s shoes right now…
Ask yourself: Would you have been frozen by panic as your retirement nest egg evaporated in days? Or would you still have your capital intact, thanks to a rigid risk-management protocol like the Palm Beach Three-Legged Stool of Safety? If there’s any doubt in your mind, review the protocol and protect yourself right now.