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Inefficient markets

China's stock markets are experiencing a classic speculative frenzy which may lead to a massive crash. And is the spectre of inflation returning to Britain?

By Michael Prest   June 2007

China guzzles stir-fry stocks

Does this sound familiar? “Investors should be fully aware that there exists no stock on earth whose prices only surge and never slump.” The China Securities Regulatory Commission, roughly equivalent to the British Financial Services Authority, posted this statement on its website in mid-May in a forlorn attempt to cool down overheating share prices in what is happily known as the “stir fry” (chao gu) stock market. The authorities’ concern is easy to understand. China’s stock markets are experiencing a classic speculative frenzy and may soon face the consequences: a crash, followed by bankruptcies, personal…

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