Stock market gains on Wall Street and elsewhere look like bubbles and will no doubt eventually correct, China’s chief bank regulator warned Tuesday.
“Financial markets are traded at high levels in Europe, the US and other developed countries, which runs counter to the real economy,” Guo Shuqing, head of the China Banking and Insurance Regulatory Commission (CBIRC), said in a news conference. , according to Reuters, Bloomberg and other media.
Guo said those capital gains are a direct result of measures taken by central banks and governments over the past year to ease economic pressures from the COVID-19 pandemic. He warned that corrections could come “sooner or later.”
Amid concerns that foreign capital could flow into China too quickly and cause instability, Guo said his agency was looking for ways to contain those inflows. That’s as he also warned about “dangerous” real estate speculation in China.
His comments would have knocked wind out of Asian markets on Tuesday. That follows the best day in nine months for the S&P 500 SPX,
while investors encouraged positive economic data. Hang Seng HSI in Hong Kong,
1% down and China’s CSI 300 index 000300,
decreased 1.2%. US Equity Futures ES00,
NQ00,
being lower too.
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The market response indicates “how sensitive markets are to the removal of policy accommodation. It also highlights that central banks will work at different speeds to escape last year’s crisis, ”Stephen Innes, chief global market strategist at Axi, told clients in a note to clients.
But Jeffrey Halley, senior market analyst at OANDA, noted that Guo’s comments came on a “ slow news day ” and made a bigger impression than they normally would. “Mr Guo’s statements contain more than a hint of politics,” he added.
“Before the bond yield tantrum last week, no one was talking about bubbles at all. A week of bidirectional price action in the markets and everyone panic about bubbles, the schizophrenic nature of the financial markets is low in the spotlight these days, ”the analyst said in an email comment.
Picking the top of the stock market is luck, not science, and the conditions that fueled the underlying rally remain strong despite markets chasing their tail in momentary noise. We may be heading for a lower stock market correction, but that’s all, a correction, ”he added.