China’s $3 Trillion Stock Surge Sparks Frenzy and Volatility: Echoes of 2015 Crash?

The unexpected $3 trillion hike in China's stocks has led to severe fluctuations similar to the 2015 financial crash. The primary causes for these market swings are profit realization and the rush of individual investors, leading to worries about a possible market adjustment.

The surge in Chinese stocks, amounting to US$3 trillion, has an unexpected side effect: an increase in unpredictability that could parallel the extreme fluctuations experienced during the boom-and-bust cycle almost ten years ago.

The 10-day price fluctuations of the key CSI 300 Index have hit a height that hasn't been observed since August 2015, based on data from Bloomberg. The instability increased as day traders began to sell off for profit, capitalizing on the significant increase in stock prices. The sentiment among investors also became wary ahead of an important financial ministry update on Saturday, due to concerns that the fiscal stimulus disclosed during the meeting won't meet expectations.

The CSI 300 has experienced nearly a 9 percent decrease since Tuesday, giving up a portion of the 35 percent increase it had seen over the previous three weeks. This increase had added $3 trillion to the market value of China's domestic stocks.

The fluctuations in the smaller firms, a sector that retail investors are keen on, are quite astonishing. The ChiNext index, which tracks start-ups traded in Shenzhen, saw a massive increase of 67 per cent within seven trading days leading up to Tuesday, only to wipe out nearly half of these gains in the following three days.

"Some short-term traders who got involved in the early stages of the rally may decide to cash in their gains, which could lead to increased market fluctuations," stated Meng Lei, a strategy expert at UBS Group in Shanghai.

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Dramatic fluctuations in stock markets of Hong Kong and mainland China.