Some analysts believe that China’s stock market is becoming a place where bad investments go to die. This has certainly been reflected in its activity lately, as China’s economy is hurting badly. And although its stock market is showing signs of having hit a bottom, there is still plenty of uncertainty and volatility left. This is more than enough to keep cautious investors out of the marketplace.
Basically, what this means is that because China is in the midst of a transition, some restructuring is occurring. China was very heavily dependent upon manufacturing and the investment dollars that flooded in as a result of this. As they switch gears toward a services based economy, a lot of those investments have ceased, and many companies are in big trouble as a result of this. A lot of those loans and investments are now bad debt and have a very low chance of being returned to the original investors. What is happening is that China is looking at ways to correct this problem, and the end result is that many of these bad debts are being transferred into the stock market. This is taking shape mostly as corporate restructuring, which ultimately is allowing companies to mask over their debt and move forward. It may solve a lot of the problems, but it doesn’t fix the fundamental health of many of these companies. It just makes their problems impossible for the general public to see. Buying stock in such a company could have huge short term benefits, as we will see, but there’s a lot of danger, too.
In the past, when the government has taken actions like these, China’s markets have seen huge gains. Between 2014 and mid-2015, the market grew by about 150 percent. It is quite probable that this will happen again. For binary options traders, this is great news. Binary options allow traders to capitalize quickly off of easily predictable and quickly moving prices. They also happen to be ideal for traders that want to limit their exposure, both in risk and in timeframes. Because binary options do not entail any sort of ownership of an asset, they are perfect for an asset like Chinese stocks or index funds because if the asset does plummet, then none of the hazards of ownership occur. Binary options are more of a prediction of price movement than anything else, and for those that want to profit off of price movement without having any of the tangible benefits or risks that come along with ownership, they are perfect. When something like Chinese assets—which have not been very reliable recently, and probably won’t be again anytime soon—are in the focus, then binary options are perhaps one of the more responsible ways to create profits.
In all, what happens in China from here on forward is going to have a huge impact on the global economy. We’ve already seen this, as the stock market crash hurt global asset prices on a big scale. Now that other nations, and China too, are showing recovery, the information that much of their gains is government orchestrated is going to have an impact of some sort. How and when this information will manifest itself in the global economy is uncertain, but for now, big gains are predicted out of China sometime soon. It might last over a year like it did the last time, or it might only be a few days or weeks. It’s impossible to tell at this point. But what is clear is that if you plan on making money off of these occurrences, then you need to take steps to protect yourself from catastrophic losses.