Some market participants claim that the recent surge in stock prices is a direct result of the downturn in the real estate market.
The domestic real estate market has been booming since 2006. Every year, more than 50 percent of the newly increased money supply finds its way into property, which has taken a toll on the stock market and the real economy.
Since the beginning of this year, housing prices have been falling in many cities, including first-tier cities. Some have predicted that nearly 2.5 trillion yuan ($407.12 billion) could flow out of the property market this year. But nobody can say for sure just how much of this money might end up in the stock market. Although some funds are likely flow into stocks, which will boost investor confidence, a simultaneous collapse in the real estate market will cause turmoil in the financial system, and eventually the stock market.
On the other hand, stable economic policies can help the stock market perform well. For investors, they only need to grasp good opportunities to profit. For regulators, they need to further improve regulations and establish a transparent and fair mechanism to investors.
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