Iam neither intelligent enough to understand the behaviour of “Mr Market” — the manic-depressive dreamt up by investment guru, Benjamin Graham — nor foolish enough to believe I do. But he has surely been in a depressive phase. Behind this seem to be concerns about China. Is Mr Market right to be anxious? In brief, yes.
One must distinguish between what is worth worrying about and what is not. The decline of the Chinese stock market is in the second category. What is worth worrying about is the scale of the task confronting the Chinese authorities against their apparent inability to deal well with the bursting of a mere stock market bubble.
Stock markets have indeed been correcting, with the Chinese market in the lead. Between its peak in June and Tuesday, the Shanghai index fell by 43 per cent. Yet the Chinese stock market remains 50 per cent higher than in early 2014. The implosion of the second Chinese stock market bubble within a decade still seems unfinished. (See charts).