2 Markets for Thrill Seekers to Watch

There are many ways adrenaline junkies can get their fix. Those not into sky-diving or bungee jumping can invest in Puerto Rico or play China’s stock market.

Shanghai Swings

The Shanghai Shenzhen CSI 300 Index is up 68% over the past 12 months. It’s also down more than 30% over the past 30 days. This turmoil tells us little about the strength of China’s economy, which continues to slow at a manageable pace. But it does say something about China’s bid to reform its financial markets. Beijing wants equity markets to become a crucial source of finance for Chinese companies and an engine of rising living standards for ordinary citizens. To make this happen, the state has already loosened its grip on market operations. Retail investors can now buy or short shares, and foreign investors have new opportunities to share in the fun.

As recent losses mount, however, Beijing faces pressure to intervene. The party leadership knows that direct intervention to stabilize prices might not work. It could also create conditions for an even more frightening correction later, with consequences for pension and insurance funds. But letting the market crash would risk intense public anger and a lasting loss of confidence.

The leadership has already acted at the margin. The government has publicly backed a move by leading brokers to buy $19 billion in shares. State-owned pension funds have been instructed to hold their market positions. The government will probably maintain a freeze on IPOs and press other brokers and financial institutions to buy shares. Yet the volatility will likely continue. Investors can’t count on courts for protection, and Chinese companies are not known for their transparency. The market will look mainly for signals from the government, delaying Beijing’s moves to liberalize its financial system.

Puerto Rico in the dollar zone

While the world has focused on Greece, Puerto Rico finds itself (at least) $72 billion in debt, and Governor Alejandro García Padilla says this sum is “unpayable.” As a commonwealth, it can’t allow its municipalities to file for Chapter 9 bankruptcy to restructure debt. Like their counterparts in Athens, Puerto Rican officials should have seen this day coming. The island has been in recession for almost a decade. Just 40% of Puerto Rican adults participate in the workforce. More than 5% of the population has left in search of better opportunities on the mainland.

However, Greece owes money to many countries, institutions and investors. Virtually all of Puerto Rico’s debt is held by Americans. And Greece might still go its own way, relieving other euro-zone countries of the need to finance an economy that won’t be viable anytime soon. But there is no possibility of a “Prexit.” Puerto Rico will not drop out of the “dollar zone,” and it will continue to benefit from a federally funded social safety net–at a cost to U.S. taxpayers.

Bremmer is the president of Eurasia Group, a political-risk consultancy