China’s top banking and insurance regulators said they’re “very worried” because U.S. and European markets looking increasingly like bubbles that could soon burst, tightening the world’s No. 2 economy and sending Asian shares plummeting.
Regulators are also concerned about the country’s property sector. Many people in China are buying homes for investment or speculative purposes, which is “very dangerous,” according to Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC) and Party secretary of the central bank. Some of China’s cities have been forced to introduce new measures to stem runaway home prices.
Guo said that bubbles in U.S. and European markets could burst because their rallies are heading in the opposite direction of their underlying economies and will have to face corrections sooner or later, Bloomberg reported.
“Financial markets are trading at high levels in Europe, the U.S. and other developed countries, which runs counter to the real economy,” Guo said. China is walking a fine line trying to curb risks at home while limiting disruptions from abroad as the economy opens to foreign capital, he added.
Asian equities retreated after Guo’s announcement about inflated valuations in global markets.
The MSCI Asia Pacific Index erased earlier gains of as much as 0.8 percent, while the CSI 300 Index in China fell as much as 1.4 percent and Hong Kong’s main gauge dropped almost 1 percent.
There is a growing concern among savvy investors that the runaway equity boom will soon crash like the dot-com bubble burst of 2000.
A growing number of financial analysts are speaking about a speculative bubble as retail investors flock to the stock market and the price of bitcoin has soared 153 percent since the beginning of December.
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