bigswing

Shanghai's Own Stock Market Rules

Biased article. The Shanghai market is not driven by "mandarines in Beijing" as you stated. But, as in many other markets in the world, primarily by ordinary investors sentiment. If Shanghai market had rose from 1200 in 10/2005 to 2400 today, it could have been a very sound ride.(healthy gain of 100% in less than 3 years). Unfortunately, the market went through a mania stage in 2007 despite repeated professional as well as government warnings of "market bubble". Millions of naive buyers got excited and push market way too high (to 6000 in 10/07 and up 400% in 2 years). It was normal to see the frenzy was subsided and market dropped 60% since then.

The current Shanghai market shares are reasonably priced. Whether the market is bottomed or not and when it will start to move up again, that is totally depends on investors sentiment (Remember there are lots of cash among Chinese investors due to extremly high savings rate of 30% of their earnings). If they loss their confidence, the market will not be UP no matter how cheap they are or whatever govt policies trying to push it up. If ordinary investors gain confidence, the market will come back any time.