Bubble – Shanghai Index?

BarroMetrics Views: Bubble – Shanghai Index?

I was surveying the stock indices and what caught my eye was the gyrations in the Shanghai Index in yesterday’s trading – plus:

  1. The fact that since  July the index had gained 46.5% (Figure 1); and
  2. Of that 46.5%, 30.62% was gained since Oct 31 (Figure 2)

Reports  in FT and the local press suggest that participants are betting that the poor data of recent times will result in more easing.

For me, what is most telling, is the fact that margin trading is on the increase. Permissioned  in 2012, the loans from broker, as at Friday’s close was up in excess of 70% since Sept (see Four Things….). Now FT reports that banks are getting into the act.

Given this increase in leverage, it won’t take much of a pinprick to cause the bubble to burst. Another potential Black Swan?

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FIGURE 1 Shanghai Index Monthly

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FIGURE 2  Shanghai Index Weekly

6 thoughts on “Bubble – Shanghai Index?”

  1. Dear Ray,
    An absolutely unrelated question. Do you know who was the first person to have coined the term Technical Analysis ?…

    Just out of curiousity… nothing important
    Regards,
    Manish

  2. The daily volatility just went crazy here, especially, financial stocks contribute most of the index’s rose, small cap stocks actually went lower a bit…

  3. Most of the profits of the brokerage firm came from financing department by correcting interests from loans to investors this year

  4. Hi Ray

    Of course not. Actually my plan is not trading until I have finished the ultimate course. There are opportunities every year and maybe every month, so why so hurry.

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