TAIPEI, Taiwan (TheStreet) -- A 20% plunge in China's stock markets since mid-June can't be labeled a mere technical correction. But even as stocks slide into bear market territory, investors are hoping the free-fall won't last for long.
Chinese stocks, in short, have entered a grin-and-bear market. Bear is for the steep decline and grin because investors, including foreign funds, trust that stocks will rise again.
Chinese "A" shares, those traded in the mainland Chinese cities of Shanghai and Shenzhen, continued to plummet on Monday even though China's central bank moved to cut interest rates over the weekend. Fallout from the Greek debt crisis contributed to the selloff.
Still, China is confident the market will rebound, if only because the economy is still growing faster than most other industrialized nations, including the U.S.
"The whole Shanghai market from a developmental point of view will become more internationalized and more regulated," said Zhao Xijun, deputy finance school dean at Renmin University of China. "We can't say it definitely reached a peak and will go down. The market will follow the economy upward."
On the bear side, markets this month fell because Chinese retail investors, the main impetus for the 150% gain in stocks over the past year, sold shares in mid-June to pay back loans. Because margin trading carries the risk of sudden selloff, the Chinese government may further restrict the practice following curbs earlier this year.