Friday, 11 September 2015 11:58

Can this be signs of another "Great Recession"?

Can this be signs of another "Great Recession"?

By: ysn

The crash in the Chinese stock market began with the popping of the stock market bubble on 12 June 2015. A third of the value of A-shares on the Shanghai Stock Exchange was lost within one month of the event. A major aftereffect occurred around July 27 and August 24's "Black Monday."

In the year leading up to the crash, encouraged by state-owned media, enthusiastic individual investors inflated the stock market bubble through mass amounts of investments in stocks often using borrowed money, exceeding the rate of economic growth and profits of the companies they were investing in. Investors faced margin calls on their stocks and many were forced to sell off shares in droves, precipitating the crash.

By 8–9 July 2015, the Shanghai stock market had fallen 30 percent over three weeks as 1,400 companies, or more than half listed, filed for a trading halt in an attempt to prevent further losses. Values of Chinese stock markets continued to drop despite efforts by the government to reduce the fall. After three stable weeks the Shanghai index fell again on 27 July by 8.5 percent, marking the largest fall since 2007.

In Canada, experts claim that the country has entered what many consider to be a recession as they deal with the consequences of a dive in oil and other commodity prices.

Statistics Canada on Tuesday reported a 0.5% decline in second-quarter GDP, following a downwardly revised 0.8% decline in the first quarter. A recession can be defined as consecutive negative quarters of growth, and Canada is the only of the Group of Seven industrialized countries in that territory. The U.S. grew 3.7% over the same time period, the Commerce Department reported last week.

“While not yet a recession, since employment hasn’t declined, Canada’s first half was about as weak as advertised, although the momentum registered in June is consistent with our view that the third quarter will provide a breather as the economy, at least for a quarter, returns to growth,” said Avery Shenfeld of CIBC World Markets in a news report.

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