Now Entering Russ's World
Soros pointed out the parallels between the current financial environment and that of 2008. He believes that China’s serious adjustment problem will turn into a crisis.
Soros is referring to the fact that stock, Global currency, and commodity markets were unstable for the first week of the New Year. China has shifted away from manufacturing and investment towards services and consumption. The sinking yuan has increased concern about China’s economy as these changes have taken place.
According to the Daily Mail, markets plummeted hours after trading in Shanghai ceased again last week. This was the second time in a week that trading has ceased in Shanghai. They automatically paused trading after blue chip stocks fell a stunning seven percent within minutes of opening last week on Thursday. This triggered a circuit-breaker. This came just days after a dive in the Chinese stock market shook Wall Street. It suffered one of the worst opening days since 2008.
The drop came after the People’s Bank of China weakened controls on the strongly sheltered yuan. This sparked more fears about global growth and caused oil prices to plummet below $33 a barrel. These levels had not been seen since the early 2000s.
These events sent shock waves across the world. London’s stocks have suffered the worst year-opening week since the late 1980’s.
The World Bank seemingly agrees with Soros, and cut its global economic growth forecast for 2016. It predicts dreary activity as developing economies and emerging markets wobble through the first week of the year.
On Monday, the Dow suffered its worst opening day of the year out of the last eight years. It slipped 450 points. S&P’s 500 Index and the Nasdaq also both closed the day out extremely low. On Wednesday, United States stocks closed at their lowest level since October.
China’s circuit-breaker automatically stops trading for 15 minutes when blue chip stocks in Shanghai drop at least five percent. The circuit-breaker was introduced at the beginning of the year. The entire market is frozen for one day if it falls below seven percent. Blue chip stocks slipped on Thursday, going below five percent within just 12 minutes. This froze the market in Shanghai. It reopened for one minute before it slipped to seven percent. The market was frozen again at that point.
George Soros, a billionaire investor, began his career in the 1950s in New York City. He has gained a reputation for his investing acumen. His hedge-fund firm gained about twenty percent a year on average from 1969 through 2011. Soros is estimated to have a net worth of around $27.3 billion.