Translated by Andrew Vanburen from a Chinese-language piece in China Securities Journal
THE YEAR OF THE DRAGON was ushered in this February with great fanfare, with investors pointing to the auspicious nature of the Chinese mythical creature and its symbolic strength and authority as a sure sign that the A-share markets in Shanghai and Shenzhen were destined for a long-anticipated turnaround.
Fast forward to today, a full three quarters later, and things look even gloomier than when the dragon first started roaring this Spring.
The benchmark Shanghai Composite Index – the go-to tracker of A- and B-shares listed on Mainland China’s two capital markets – is currently down nearly a fifth from year-earlier levels.
Its year-to-date performance isn’t much better, with the Index over 7% down from January 1 levels.
And for those yearning for potentially greener pastures in neighboring Hong Kong?
Things aren’t looking too good on China’s neighboring bourse either, with the Hang Seng Benchmark Index down around 5% year-on-year.
So for the time being, Mainland Chinese investors are by default confined to considering options in the domestic A-share markets, given the much cheaper share prices on hand.
But unfortunately for them, this month will likely offer little in the way of respite for shareholders seeking long sought-after stability and serenity.
The current month of September started off optimistically enough, with sharp falls in share prices over the summer expected to turn around this Autumn – for technical reasons if nothing else.
Furthermore, the recent healthy gains in critical overseas stock markets augured well for a repeat performance at home in Shanghai and Shenzhen.
This slapped a figurative fresh coat of paint on September, helping boost turnover and optimism into the bargain.
But just as the Fall season was getting underway, the market took a big dip on Tuesday, falling nearly 1% to a nearly four-year low on a decided lack of catalysts.
Monday’s gains were erased in an instant and a new nadir not seen since early 2009 – shortly after the height of the global financial crisis – was achieved.
This rocky start to the month portends more hurdles to come in the nearly half-decade quest to return to robust, sustained growth in China’s stock markets.
This teasing and taunting by the benchmark doesn’t bode well for investor sentiment this month.
However, this is not to say that a significant bounceback is out of the question in the month of September.
What is does suggest is that those investors still actively trading in the market, and not afraid of significant daily turnover, are doing more straw grasping than value investing.
With the long-awaited stimulus packages from Washington and Beijing somewhat delayed by the election in the former and the upcoming leadership transition in the latter, investors are forced to look elsewhere for upside catalysts.
The problem is that with sluggish economic growth in the world’s two largest economies and quantitative easing measures delayed longer than anticipated, there isn’t much else to bring smiles to the faces of Chinese investors, especially now that interim reporting season has drawn to a somewhat quiet close.
Welcome to September, everyone.
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