Cross-posted from Investing in Chinese Stocks.
I had a feeling the A-share market had to be peaking, at least in the short-run, when people who don’t know the difference between an A-share, an H-share and a time share started asking me if ASHR was a good buy.
Coverage of the market’s 6.5% plunge on Thursday included this nugget:
History is always surprisingly similar, on May 30, the stock index also plunged 6.5%.
iFeng: 沪指暴跌6.5%祭奠530 五百股跌停
I posted on this at the start of May: Will Chinese Stocks Crash in May?
A 6.5% drop on May 30, 2007 was the first move of a 5-day sell-off that shaved 23% off the index.
Recently, there’s evidence that QFII’s are again lightening up on Chinese shares, selling down positions as the price rapidly increases. This has at least one person drawing a parallel to the past. In terms of psychology, it is an apt comparison. The Chinese stock market is driven by emotion and psychology, and at some point there will be a terrific correction that will have some explanation, but will mainly be a psychological reaction. This bull market has yet to see a significant correction and the current percentage gains from the ongoing rally have exceeded the gains from 2006-2007. A correction of more than 20 percent is possible.
Looking ahead, if there is a 20% correction here, then the next parallel that will be brought up is the October 2007 market top. Chinese netizens are all over it. This comes from friends on WeChat. Chinese reactions to the drop in stocks. Some people are levered up, so the 6.5% drop led to some hefty losses. 【不服不行】8年前惨剧今日重演！朋友圈一片哀嚎，天台站满人！
First the comparison to May 30, 2007:
This led to contemplating a jump:
Followed by: Don’t jump! BTFD!
Don’t fear, it’s only a technical adjustment!
