China Stock Market Crashes Again

Chinese mainland shares are in the process of mean reversion towards its 200 day moving
average. The Shanghai Composite went as far as 55% above its 200 MA into June of this
year. That was an extremely overbought condition, similar to the peak in 2007.
Credits: ShortSideOfLong

South China Morning Post (Jul 27, 2015) - Monday ended with the SCI300 index of 300 leading Shanghai and Shenzhen stocks off by 8.6% and the SSECI (Shanghai Composite) down 8.5%. That is their biggest one day fall since 2007. The abrupt drop, during the afternoon trading session on the Shanghai stock exchange, appears to signal worried investor sentiment, despite the past month of massive government efforts to prop up the equity markets. Traders said that there was no specific news that triggered the sell-off, and said that the government organized rally had been too quick and too steep to be sustainable. 

The Chinese stock markets have been a roller coaster ride for many investors. A huge rally began in October last year and propelled the market upwards by over 150%. Late June saw a brutal 30% correction, which sparked panic and the suspension of trading in most Chinese shares. That caused the Chinese government to loosen liquidity, cajole some companies into buying back their shares, and cancel many IPOs. It even announced a target, for the indexes to reach 4,500 before support measures would be withdrawn. Amazingly, Monday’s crash still leaves the mainland markets up over the past three weeks. Since the markets’ recent low on July 8, they had climbed by 18% till Friday (July 24).

China’s Stock-Bubble Burst

Adam Hamilton (July 10, 2015) - [...] the Chinese stock markets had been the most-interesting financial story of 2015.  Having the world’s second-largest economy, China is immensely important in global markets.  And its stock markets were soaring, as evidenced by China’s flagship benchmark stock index.  It is the Shanghai Stock Exchange Composite Index (SSEC), the local equivalent of the US S&P 500.

By the ends of March, April, and May, the Shanghai Comp had soared 15.9%, 37.3%, and 42.6% year-to-date!  Such gains were astounding, creating the equivalent of trillions of dollars of wealth for Chinese stock investors.  And unlike major stock markets in the West, China’s are dominated by its army of retail investors.  Ordinary Chinese people account for over 5/6ths of all the national stock-market transactions. So China’s soaring stock markets truly were a popular speculative mania. More HERE