This is a good example of why allowing short sales is so healthy for a stock market. Without the shorts no one wants to buy on the way down and no one was there to keep it from going so high in the first place. Perhaps a few trips on the roller coaster along with the fact that no one is working to figure out which companies are fraudulent will get the officials to rethink their position that shorting is "unpatriotic"
The last bull market peak in China was at 2200 on the index. With it now below 3000, a good 6-7 years later, stocks are starting to look reasonable value again. The China shares listed in Hong Kong look interesting as well. __________________ "If someone has a gun and is trying to kill you, it would be reasonable to shoot back with your own gun." - the Dalai Lama.
There are many reasons for the drop. The most important one yet unfamiliar to overseas investors is that from this year till 2010, the expected increased supply of stocks in China's A-share market will be 3 times the size of the total existing supply at the end of 2007. Several years ago, not all A-share stocks were allowed to circulate in the stock market, but from 2005, China enforced reform so that all stocks are now allowed to circulate, and these re-born stocks have a three-year buffer period, now the pandora's box has been opened. You cannot expect a market to increase in size by 200% in three years, without undergoing huge drop, not for a one of this size.
This drop on the SSE has been a factor of government policy changes, the world financial crises, but most of all blind panic by the local investors. The SSE needs this and the local investors need these to happen also, so they understand the principles of a market, like it will not go up for ever and that markets are wild animals at heart, and to be paitent and plan their trading better, this will make them all better investors. That said in ten years when the index is at 12000 everyone will be looking back at this as just another bump on the journey. I do believe that we will see many more of these in the coming few years as this market finds itself and irons out all the regulations and what not that go with establishing a new market. For the long term investor there will be some good investments to be had just need to find the companies that will last this journay, For the shorter term trader we will need to be nimbale and trade the market not our beliefs. Happy trading everyone if you are in this market it will be a great jounery.
http://www.dbxtrackers.co.uk/EN/showpage.asp?pageid=143&inrnr=151&pkpnr=286&stinvtyp= In any market once hairdressers, teachers and doctors stop their work and start trading you know its time to short 'em. Last year the local brokerage industry was openly supporting an OTC system for retail traders for stocks. In China don't forget a large number of convertibles (mainly mandatory & contingent) reached "maturity" in Q2-Q3, plus on HKEx from Feb 2007 IPO's started coming out with 6 month lock in periods for international institutional investors a.k.a hedge funds, most stopped IPO churning and ran for the doors.