The Shanghai market was down 5 percent yesterday. Businessweek says:
Posted by: Frederik Balfour on July 29
How do you spell stock market bubble? S-H-A-N-G-H-A-I. China’s main share market is up 90% this year, and some IPOs have skyrocketed several times their offer price on the first day of trading. Sichuan Expressway soared 300%, repeat 300% on its opening day of trading on Monday July 27, and China State Construction Engineering Corporation surged 70% today, July 29, even as the Shanghai Stock Index plunged 5%. Of course that might just be due to a sell-off in most other stocks so people could climb onto the IPO bandwagon. Chinese investors routinely liquidate existing positions to pile into new issues.
But let’s face it, Pigs Don’t Fly, not even in China. The febrile enthusiasm exhibited by Chinese investors in this latest market rally, shows that nothing was learned from the market rout that started in late 2007. If anything, people are desperate to plough back into the stock market to make up for previous losses. In China, the risk of missing a rally is more important to many punters than the potential downside should there be a correction. See my story Suckers Rally. Oh, and let’s not forget to mention that Shanghai has overtaken Japan as the world’s second largest stock market.
It’s important to remember that China’s stock market is still something of a black box.
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