Stock Market Volatility: Many Investors Lose Money in Just a Few Days.

Stock market turmoil. Beijing worries economic crisis could spark political chaos. China's stock market experienced ups and downs before and after the National Day holiday. Experts believe that the Chinese Communist Party authorities have no way out other than strongly stimulating the stock market to soar. Behind this is the concern of the party leader Xi Jinping about his power and position. Xi is most worried that he will be overthrown by a coup during an economic crisis. A shares soared and plummeted. Investors wailed. Do the authorities have any tricks? Under the strong stimulus of the Central Bank of China's investment of 800 billion yuan, RMB, same below, in late September, the stock market has risen sharply in recent days. However, after the incremental monetary stimulus policy announced by the National Development and Reform Commission failed, yesterday, October 9th, the three major A-share indexes opened sharply lower and fell. The Shanghai Composite Index once fell nearly 7 percent and finally lost 3,300 points. The Chinex Index fell more than 10 percent. Investors wailed. The Central Bank of China announced today, October 10th, that it has decided to create a securities, funds and insurance companies swap facility and will accept applications from now on. The first phase of the operation will be 500 billion renminbi, which is equivalent to encouraging institutions to invest in the stock market. This policy was proposed in late September but was announced before the opening of today's market after yesterday's sharp drop in mainland stocks. This morning, the Shanghai Composite Index led the gains and rose by nearly 3 percent, regaining a position above 3,300 points and once breaking through 3,350 points but fell again in the afternoon, closing at 3,301 points. Sun Guoxiang, associate professor of the Department of International Affairs and Business at Nanhua University in Taiwan, told the Epoch Times that the authorities' new round of economic stimulus policies did not seem to achieve the expected results. The withdrawal of large capital may be one of the factors. Large funds have more market intelligence and resources and can withdraw quickly before market fluctuations. Chinese media reported that since the Chinese stock market rose from September 24th to October 8th, more than 100 listed companies have announced stock reductions, including 57 from October 1st to 8th. On the contrary, in recent days, many stockholders have seen low credit loan interest rates and want to use them to raise funds to invest in the stock market. Yesterday, it was suspected that a stock investor used 10 times leverage to allocate 50 million yuan for stock trading and committed suicide after the position was liquidated. But the authorities refuted the rumor about this news. The Chinese Communist Party authorities and banks issued warnings yesterday, strictly prohibiting illegal stock trading with loans, and the loans will be recovered once discovered. However, the bank admitted that there are practical difficulties in prevention. Sun Guoxiang said that with the losses of a large number of young stock investors and stock traders who use loans to trade stocks, social dissatisfaction may increase. Loan trading in stocks is undoubtedly one of the biggest risks. Once the stock market cannot be effectively stabilized, it will expose highly leveraged investors to greater financial risks and may even lead to a large-scale financial crisis. Xu Zhen, a senior figure in the Chinese capital market, told The Epoch Times that one of the reasons for the stock market crash on the 9th may be that the chips that were locked in the past have already made a profit, resulting in a large amount of selling. The three forces of selling were the reduction of holdings by small and medium shareholders of listed companies and short-term profit-taking by institutional investors. He estimated that the market will consolidate in the range of 3,200 to 3,600 points for a period of time, and retail investors should not add leverage to trade stocks in this range. The stock market is short-lived, and the economy continues to be depressed. Compared with stock speculation, lying down and saving money may be the safest way of life for ordinary people, he said. Regarding the central bank's promotion of securities, funds and insurance companies swap facilities to encourage institutions to leverage stocks, Sun Guoxiang said that these measures should theoretically inject liquidity into the market, reduce corporate financing costs, and encourage investors to re-enter the market. However, the poor market response is also due to a deeper crisis of confidence, as well as economic structural problems such as insufficient consumer demand, the real estate crisis, and declining corporate profits, which cannot be easily solved by short-term policies. Following the successive press conferences held by the Central Bank of China and the National Development and Reform Commission, the authorities notified yesterday that Chinese Finance Minister Lan Fuan will attend a press conference at 10 a.m. on the 12th to introduce the increase in the counter-cyclical strength of fiscal policy. Wang He, an expert on China issues, told the Epoch Times that the Chinese authorities want to stabilize the situation and appease all parties. But under the current fiscal difficulties, the Chinese Communist Party can no longer invest 4 trillion to rescue the market as it did in 2008, and the current policy space is already very narrow. The current stock market is still at 3,300 points. If the Ministry of Finance does not introduce any substantial policies, the stock market will definitely fall sharply. Analysis. Xi Jinping's concerns about economic difficulties have driven internal strife to break out. The stock market crash in 2015 was rumored to involve a financial coup involving collusion between officials and businessmen, and the authorities arrested a large number of people afterward. Since Xi Jinping has been cleaning up the financial sector in recent years, some people suspect that this stock market crash is related to the dissatisfaction and rebound of some senior financial executives. Sun Guoxiang said that there is no conclusive evidence to prove that this stock market fluctuation is a financial coup or political resistance. But it is more likely to be caused by the government's stimulus policy that violates economic principles, coupled with the structural problems within the financial market itself. Wang He said that Xi Jinping began to strictly clean up the financial system in 2021, so it is unlikely that anyone can carry out a financial coup like in 2015. This wave of the stock market surge is certainly driven by the authorities' policies, but also mixed with the irrational fundraising impulse of the entire society. Some people believe that Xi Jinping, who has personally triggered another round of a bull market driven by stimulus measures, has almost no way out. If he fails, he may have to abdicate. Wang He told the Epoch Times that the current governance of the Xi administration in all aspects of politics, economy, and society is in a mess and is in an unprecedented predicament. In particular, the various factions within the CCP, including the CCP elders forcing the palace, and the struggle between the central and local forces are very fierce. In fact, Xi Jinping's power is already shaking. If Xi wants to save this situation, he must stabilize the economy so the authorities have no way out after pushing the stock market to soar. But his main pressure is whether the economic difficulties will induce a coup and whether the internal struggle will break the situation. The impact of economic factors is serious, but the political struggle is decisive. Sun Guoqiang also said that China's economic performance has always been an important pillar of the legitimacy of the CCP regime. If the economy fails, it may be considered the result of Xi's own policy mistakes. But whether he will face abdication as a result still depends on changes in the power structure within the CCP. Xu Zhen said that the CCP authorities hope to save the economy, consumption, and local debts through the rise of the stock market. This is wishful thinking and the final result is to trigger the financial crisis process. The financial crisis will definitely trigger a social crisis. When the people's grievances are focused on the CCP, just like the blank paper revolution, the CCP's political crisis is not far away.