The past 10 years were really the decade of China, those who got into Chinese equities and real estate have struck it rich. Human memory has a recency effect and Chinese have ignored the fact that there are times when equities and real estate valuations come down for a very long period of time after an extreme overvaluation.
As a result, everyone in China and Hong Kong wants to invest. Everyone is afraid of not investing enough in stocks and real estate. Everyone is afraid of holding too much money because money “depreciates” in “value”.
To challenge that view, I have produced the following chart which compares the stock market bubble in Hong Kong/China equities with some other stock market bubbles. Here is the update of the chart, which compares the Hang Seng Chinese Enterprises Index and Shanghai Composite Index (2007 peaks) with a few other classic stock market bubbles: Dow Jones Industrial Average at 1929 peak, Nikkei 225 at 1989 peak, and the Nasdaq at 2000 peak:
Even in a prolonged bear market there are buying opportunities, but whether they genuinely last I have serious doubts about. For that matter, as a sceptic, I am also doubting my bearish position after getting it right for the past 9 months or so. But my hunch is that this is not the bottom yet. I could be wrong here, but my stance is that the global macro environment remains extremely uncertain and full of potential trigger points for further downside.