While more correlated than FXI, CAF still lags the relative performance of the SSEC by about half: http://finance.yahoo.com/q/bc?s=000001.SS&t=6m&l=on&z=m&q=l&c=caf
Problem is how do we *really* trade that index? The ETFs have been a rip off in tracking the moves...
I remember when the index was making new highs everyone was saying it was going to continue into 2008 due to the Olympic games, well the index fell way before the games even started and has still not seen any kind of move higher. When you hear that much hype around any index or sector its time to sell. Oil going to $200 (hint hint)....
Here is the real reason.... Most of the shares in China market are not floated, but the government has decided to float more of them to make the stock market really more market-oriented. In 2008, 135B shares will become floated (RMB2-3T). Here is a table showing how many shares become floated everyday. http://www.zhicheng.com/dxf/200808.html China market capitalization is just RMB15-16T so the impact is huge.
Another big reason is that last yr's earnings were inflated due to the listed companies' huge profits from their investment in the stock market. So worse stock performance results in worse earnings and then even worse stock performance.
the interesting thing to me is the complete lack of volume. if you look @ the volume on the way up, it was at least 2x, and many days, 4x what the volume has been thru most of the decline. volume spikes really only come on up days too. never really witnessed anything like this. one would think that we would have to see some sort of explosion in volume over some days of ugly declines before any lasting bottom can be put in. that said, i find it incredible the magnitude of the decline without any volume, so the whole thing kinda confounds me. you'd think there would be some panic selling (and requisite volume) given how far it has dropped from the bubblicious high. the only thing that makes sense about it is that, given the lack of volume, we continue to bleed lower.
What are you talking about? there are massive volumes on the downtrend on the shanghai market. As richardyu said, do not expect major bull runs back to the highs until the new share issues are done.