China decrees stock market bubble is go

Friday, 5 December 2014

Wondering why Chinese stocks are going vertical? The Chinese Academy of Social Science (CASS) is forecasting the Shanghai Composite will trade between 4000 and 5000 next year. To put that in percentage terms, it would require an increase of between 40% and 80%.

Yin argues the main driver is government intervention. Since China wants to move away from debt financing and revive the equity markets as announced at the Third Plenum last year, a government directed bull market could spur equity financing and risk taking that bails out the economy.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.