China’s mega-bear market is still well and alive27 August, 2012, 15:41. Posted by Zarathustra
As noted minutes ago, Shanghai composite has made new post-crisis low today.
If one has followed the chart below, one should probably be not surprised by the absolutely pathetic performances of Chinese equities.
To those who are not familiar, the chart below shows past stock market bubbles, with their peaks aligned and rebased to 100. The past bubbles in question were the 1929 pre-Great Depression Dow Jones Industrial Average top, 1989 all-time peak of NIKKEI 225, NASDAQ dot-com bubble top, and Chinese equities top in 2007 (represented by Shanghai Composite and Hang Seng China Enterprises Index).
As you can see from the chart below, the absolutely pathetic performances of Chinese equities in the recent years are nothing too surprising after all if you compare them with other post-bubble markets. And by now, China bulls should finally have learned that the pace of GDP growth may after all has very little to do with stock market return.
John Authers at the Financial Times have also recently picked up this idea that the underperformance of Chinese equities is nothing so out-of-ordinary when compared with other bubbles. In addition, he has a very interesting chart of Deutsche Bank’s basket of China-exposed European stocks, which has also been underperforming relative to the US-exposed peers.
In any case, the mega-bear market of Chinese equities is still well and alive.