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Has the Shanghai Composite Index passed the bottom and is it time to start investing in the China stock market index again?

Has the Shanghai Composite Index passed the bottom and is it time to start investing in the China stock market index again?

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Thanks Gembrooks for the extensive comment. I made the mistake not to follow the warning from the methodology and get out or carried out my prefered option alternative to insure against a (temporary) downturn with buying some put options.

Thus, I am still invested in China and also now in September have made the decision not to sell yet since the "sell warning" originated from the level of gains in the previous period and not from the overall pattern in itself.


I personally believe that the correction has not finished yet. I got out at the top (3rd August) before the crash but only because I work in China and had a Chinese friend who translated local news from the radio.
At that point:
China's bank profits have fallen below 29% and exports have fallen between 25-34%. That combined with the tightening upon lending created a panic as major investors got out.
The trending curve which has appeared at the present line close today 25th August at 2980 is similar to that of the peaking curve at the end of July. I watched the indicies movement during todays trading (25th) and it bounced into a secondary bear from -6% to the present level today at 2980 (-3%) indicating to me that the 6-8% gained over the last few days is in danger of being lost of which is already 3% down. A reaction caused by withdrawl of foreign investment and another tightening of bank policy loans and outstanding debt.
The panic was stopped by announcements being made on the radio for investors to keep calm.
If it is predicted by some financial wizards(!) that the finishing top line for the year will be around 3,900, I believe that the market must descend, and I estimate at least twice more. I base this on the fact that so many new  stock trading accounts have now been opened which incread by some 400 thousand + in July alone and a further few hundred thousand in August. With millions of people wanting to try their luck, how indeed can the stock market not get over fired.(except as more private middle investor money goes in, the major holders will withdraw profits, balancing the books, so the indicies doesn't appear to be in the red)
For the moment I have decided to hold back, just for a short while. China has it's 60th aniversery at the beginning of October (the 1st) and I expect investors to take their profits so that they can relax during the week long holiday.
As an additional point for investors of funds, you also need to keep your eye on the Heng Sheng (HK) indicies. When the Shanghai Composite goes into a dangerous negative, trading stops on the Heng Sheng ready to adjust after the close of business on the Composite before normal trading resumes on the Heng Sheng until the end of the day. Not only this, but look out for the number of Hong Kong company share buy backs that appear over Composite negative days. There were at least 3 before that last Composite crash (and 1 to 2 during) Today (25th August) there has been one. I am sure there will be more tomorrow, and to me, this will dictate where the Composite is going.
Shanghai Composite down 5.3% in late trade
LOS ANGELES (MarketWatch) -- China's benchmark Shanghai Composite Index took another sharp dive Tuesday, falling 5.3% to 2,832.76 in late action. The financials were among the loss leaders, over apparent liquidity concerns, with index component Industrial Bank Co. /quotes/comstock/28c!e:601166 (CN:601166 34.04, -2.61, -7.12%) falling 10%, and China Minsheng Banking Corp. /quotes/comstock/28c!e:600016 (CN:600016 6.81, -0.44, -6.07%) dropping 8.2%. Resource shares also dragged the market down, with heavyweight Baoshan Iron & Steel Co. /quotes/comstock/28c!e:600019 (CN:600019 7.01, -0.44, -5.91%) losing 8.6% of its value

China's stocks are too expensive and the government's proposal for banks may help bring prices in line with US shares, said Jack Ablin, who oversees US$60 billion as chief investment officer at Harris Private Bank in Chicago. Even with this month's decline, the Shanghai index trades at 31.7 times reported earnings, compared with 18.9 for the S&P 500.

'Clearly, it is a step to damp down the speculative lending and is warranted,' Mr Ablin said in an interview. 'Anyone who thinks that the Chinese stock market is a barometer for the economy is misguided. It has to drop regardless of what happens in the economy.'
A record US$1.1 trillion of new loans in the first half that helped support the nation's US$585 billion economic stimulus package spurred stock gains this year. Regulators are proposing that banks deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, according to the sources, who have seen the document.


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