The Job of the Market is to move from one worry to another.
Last few weeks have all been about BREXIT but do you even remember what market was worried about, discussing and talking in June 2015.
It was all about China
"If I had just $1, I’d invest in China": Stephen Roach
— Deepak Singh (@smarket) June 26, 2015
Chinese stock market is going to Moon. This was the talking point before June 10 2016. The reason: There was anticipation of integration of Chinese financial market with rest of the world. There was hope of MSCI adding Chinese A shares in MSCI EEM. Here's Shanghai Composite Index weekly Chart (till June 2015)
Global Experts: Buy China Sell India
Then came the MSCI decision - not in favor of China-
The decision punctured the rally -
The decision became a major turning point for the Chinese market. What happened after that was massive wealth destruction. Chinese Govt made many efforts to revive the market but nothing worked
Beijing cut stock transaction fees, relaxed margin call rules and expanded the financing channels for brokers (Chinese Gov't working hard)
— Scott Redler (@RedDogT3) July 2, 2015
Chinese stock market has now declined to Deep Value Levels Technically i.e. 200 week moving average but nobody seems excited.
Nobody is interested about Chinese stock market in 2016: The market has been super quiet.
Here's Shanghai composite index in 2016 YTD
Most of the Global Financial markets have been extremely volatile in 2016 but Chinese market has become quiet. Nobody seems to be talking about it...and the market is paying the price for over-enthusiasm in 2015.
"You still have an artificially high P/E multiple and that needs to come down as the A-share market adjusts to fundamentals" ~ Tony Chu
China is a top source of concern for Marco economics follower. Hence, keep an eye on Chinese Market. Any decline below 200 week ma will once again make the country hot debating point among market participants. But before that happens...Shh Let's discuss BREXIT 🙂
Also Read: Silver is the New Gold in 2016
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers