Chinese Bear Market Enters 'Unlucky' Numerical Ground

China's Shanghai Composite has now been in a bear market for 105 days. The index is down 26.82% from its peak on 10/16/07. Below we highlight a chart of the Shanghai Composite since 2004. As shown, the index rose a whopping 502% during its last bull market, and while declines of 26.82% are unfortunate, long-term investors in the index should still be holding on to plenty of gains.

What is even more unfortunate is that the index is currently trading at 4,457. Original readers of Bespoke may remember our post back in May that highlighted a WSJ article on Chinese investors' faith in numbers. Chinese tickers are made up of 6 numbers, and many investors are happier to buy stocks with lucky numbers rather than unlucky ones. In China, the number "8" is associated with sudden fortune, so it is the most lucky of them all for investors. The number "4" -- not so lucky.

Four is considered a bad omen since it refers to the fourth stage of human existence -- death. As we mentioned earlier, the index is currently trading at 4,457, so with two "death" numbers in the price, sentiment is probably leaning toward the negative side.

Below we highlight the nine bear markets of the Shanghai Composite since 1995. The average length of a Shanghai Composite bear has been 158 days, and the average decline has been -30.47%. As shown, the current bear has lasted 105 days and declined 26.82%.

Comments

[SchraderTrader:]

What were the gains leading up to each bear market? That may provide us with a more accurate forecast for the extent of this bear market.

2008 Jan 29 02:33 PM

[billb:]

Exactly SchraderTrader. 26% "bear market" after 500% of gains, seems more like a slight pull back to me.

2008 Jan 29 02:45 PM

[TObject:]

Check out Elliott Wave count - still in Bull Market - wave IV correction. Wave V to come
stockcharts.com/def/se...

2008 Jan 29 10:34 PM