Wednesday, December 05, 2012
Possible Reasons Behind the 2.9% Surge by China’s Shanghai Index
China’s flagging stock market, which has also been the world’s laggard, surged today by a remarkable 2.9%
The reasons, according to Bloomberg, “the government allowed insurers to invest more in banks and investors speculated profits at construction and cement companies will increase.”
But I think today’s bounce could have been more about the belated effects of China’s credit easing policies chart from (Danske Research). It’s just that investors have used today’s deregulation as an impetus to drive markets higher.
It could also be about severely oversold conditions and or a combination of all of the above.
The Shanghai index has been on a downdraft along with copper prices for about a year.
The recent spike in copper prices seems to have also presaged today’s outcome.
We will see soon if today’s biggest advance in 3 months will mark the inflection point of the China’s major bellwether, or if current easing policies has found enough "traction" to reverse the current downtrend and reflate China's asset bubbles.