It may be time to jump back into China shares, says one market watcher.  Photo: dayoo.com

Translated by Andrew Vanburen from a Chinese-language piece in First Financial by blogger Zhou Yu


That being said, one must look before one leaps.

Now might be a good time to jump back into the China stock markets, as a rebound appears imminent.

Here’s how the numbers look...

The Shanghai Composite Index tracks A-shares -- and their poorer cousins, the B-shares – listed on the Shanghai and Shenzhen stock exchanges.

As of Tuesday market close, the benchmark index is hovering just north of 2,300 points, or down 13% from a year earlier but up 4.5% from the beginning of this year.

The phenomenon responsible for this latter status is that calendar year 2012 actually began with shares mired in a major trough, reaching its nadir on January 5 when the Shanghai Composite fell to a year-to-date low of 2,148.

Things began edging up with the arrival of The Year of the Dragon, but soon after began another nosedive which resulted in a low of 2,252 on March 29.

Now, we investors have the distinct pleasure of enduring our third major dip this year, and given the duration and extent of the previous two predecessors in 2012, it looks like we are well overdue for an upswing.

Why am I back on the diving board?

Because I’m ready to jump into the pool again.

China shares are mired in their third dip of the year.  Image: Sinafinance

On Monday, we got another glimpse into just how interconnected the world is, for better or for worse.

Who would have thought that when a country like Greece (which has fewer people than Beijing) sneezes, the entire global financial system would catch a cold?

And likewise, when the Hellenic Republic’s fever abates somewhat, the rest of the world breathes a deep sigh of relief.

That’s exactly what happened on Monday after Greeks voted to put a pro-bailout/pro-austerity party into power, thus bringing stability to a relatively small EU member and peace of mind to investors everywhere.

So when the election results were made public, markets in Tokyo, Hong Kong and the PRC responded favorably.

The fact that indices in regional markets seemed to go back to their old ways the following trading day should not be overemphasized, as the crucial thing is that the “Greek overhang” has been remedied... at least for the moment.

The situation in Southern Europe had been an impediment to cheerier sentiment in Shanghai and Shenzhen for most of 2012, and now that this major roadblock is neutralized for the moment, there is all the more reason to expect a run in the offing.

But one word of caution about the risk of over-exuberance...

While the benchmark index is showing signs of life, daily turnover is still reflective of a very tenuous and timid investing public.

So like on a cold day when shivering swimmers are standing beside the pool chatting over hot tea, it just takes one brave soul to make the first leap, and climb atop that diving board.

See also:

IPO DROUGHT: New China Listings Hit 3 Year Low

Greek Vote Comedy Or Tragedy For China Shares?

HK SHARES: Trash Already Tossed To Curb

In Praise Of China’s Retail Investors

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