The highs of the stock market on Wall Street and elsewhere are looking like bubbles and should eventually correct themselves, China’s top banking regulator warned on Tuesday.
“Financial markets are trading at high levels in Europe, the US and other developed countries, which goes against the real economy,” said Guo Shuqing, head of the China Banking and Insurance Regulatory Commission (CBIRC), in comments at press conference, according to Reuters, Bloomberg and other media.
Guo said these asset gains were a direct result of measures by central banks and governments last year to ease the economic pressure of the COVID-19 pandemic. He warned that corrections could come “sooner or later”.
Amid fears that foreign capital could flow too quickly to China and create instability, Guo said his agency was looking for ways to control those flows. He also warned of “dangerous” real estate speculation in China.
His comments were credited for taking the breath away from Asian markets on Tuesday. This follows the best day in nine months for the S&P 500 SPX,
while investors were animating optimistic economic data. Hong Kong Hang Seng HSI,
fell 1% and the CSI 300 index of China 000300,
dropped 1.2%. US stock futures ES00,
NQ00,
they were also pointing down.
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The market reaction indicates “how sensitive the markets are to withdrawing policy accommodation. He also points out that central banks will operate at different speeds to get rid of last year’s crisis, ”Stephen Innes, Axi’s chief global markets strategist, told clients in a note.
But Jeffrey Halley, a senior market analyst at OANDA, noted that Guo’s comments came on a “little news day” and made a bigger impact than they normally would. “Guo’s statements contain more than a suggestion of policy,” he added.
“Before the rage last week, no one was talking about bubbles. A week of bidirectional price action in the markets and everyone is in a panic with the bubbles, such is the schizophrenic nature of the low attention span of financial markets today, ”said the analyst in comments by e-mail.
Choosing the “top of the stock market is luck, not science, and the conditions that drove the underlying bullish remain as strong as ever, despite the markets chasing their tails in short-term noise. We may well be heading towards a downward correction in the stock market, but that is all, a correction, ”he added.