Stock market rallies on Wall Street and elsewhere look like bubbles and will eventually have to be corrected, China’s top banking regulator warned on Tuesday.
“Financial markets are trading at high levels in Europe, the United States and other developed countries, which is contrary to the real economy,” said Guo Shuqing, head of China’s Banking and Insurance Regulatory Commission (CBIRC). in comments at a news conference, according to Reuters, Bloomberg and other media outlets.
Guo said these asset gains have been the direct result of measures by central banks and governments over the past year to alleviate the economic strain of the COVID-19 pandemic. He warned that corrections could come “sooner or later.”
Amid concerns that foreign capital could flow too quickly into China and create instability, Guo said his agency was looking for ways to control these inflows. He also warned of speculation of “dangerous” properties in China.
His comments were attributed to the wind exit of Asian markets on Tuesday. This follows the best day in nine months for the S&P 500 SPX,
while investors encouraged optimistic economic data. Hang Seng HSI of Hong Kong,
fell 1% and China’s CSI 300 000300 index,
fell 1.2%. US stock futures ES00,
NQ00,
they also pointed downwards.
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The market reaction indicates “the sensitivity of the markets to the elimination of policies. It also highlights that central banks will operate at different speeds to move away from last year’s crisis, ”Stephen Innes, Axi’s world market chief strategist, told clients in a note.
But Jeffrey Halley, a senior market analyst at OANDA, noted that Guo’s comments came on a “slow news day” and had a big effect on what they would normally have. “Guo’s statements have more than a political clue,” he added.
“Before the downturn subsided last week, no one was talking about bubbles. A week of two-way price action in the markets and everyone is panicking about the bubbles, such is the schizophrenic nature of little attention in today’s financial markets.” said the analyst in comments sent by email.
Choosing the “top of the stock market is luck, not science, and the conditions that drove the underlying rally remain as strong as ever, despite markets chasing their tails in short-term noise. We could go for a lower correction in the stock markets, but that is all it will be, a correction “, he added.