When Greenspan talks, markets listen. Still.
Chinese shares have fallen after former US Federal Reserve head Alan Greenspan said its stock market was overvalued and due for a “dramatic contraction”. His remarks had an impact on markets in the US , Europe and Asia, fanning already prevalent fears of a slowdown in China ‘s booming economy.
Signs that Beijing was trying to rein in its startling growth earlier this year led to a temporary fall in shares. But markets have since risen to levels Mr Greenspan said were “unsustainable”.
The Shanghai Composite Index dropped as much as 1.5% following Mr Greenspan’s comments before closing down 22.58 points, or 0.5%, at 4151.13. He said Chinese markets had risen by 50% since the start of the year and that this trend could not continue for much longer.
Can the irrational exuberance continue indefinitely? If you think the answer is yes, drop me an email – I have some tulips I’d like to sell you.
Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.