Technically yes China's Shanghai index (SSEC) is in a bear market. Losses that reach 20% is technically defined as a bear market.
The SSEC could probably be haunted by the September-October seasonal stock market weakness.
In addition, many have used the Baltic Dry Index (BDI) as a "rational" for a major inflection point on China's stock market aside from the purported policy induced slowdown in credit flows.
Do we share the view that China's stocks will continue to collapse? No.
In contrast to the past where a decline in China's market had prompted for a rise in the US dollar index (for example see April) or our correlation trade, the recent slump have ironically been opposite-the US dollar Index fell!
Our correlation trade extrapolates to falling global stock markets and commodities along with a rising US dollar index (flight to safety) where a higher US dollar index would have signaled 'tightening liquidity'.
But this doesn't seem so. Hence the continued buoyancy in most stock markets.
The US stock markets ended lower last night but hardly reflected on SSEC's crash.
So if the US dollar index persist on weakening amidst sagging global markets, they are likely to signify an "interim pause" and not a major reason for a collapse.
And this should also apply to commodities.
As we see from the Russian experience, where the RTSI earlier fell by 30%, the Russian benchmark have managed to recover most of its loses and now trades above the 50-day moving averages.
This looks likely the paradigm for the SSEC than for a major meltdown.
The SSEC could probably be haunted by the September-October seasonal stock market weakness.
In addition, many have used the Baltic Dry Index (BDI) as a "rational" for a major inflection point on China's stock market aside from the purported policy induced slowdown in credit flows.
Do we share the view that China's stocks will continue to collapse? No.In contrast to the past where a decline in China's market had prompted for a rise in the US dollar index (for example see April) or our correlation trade, the recent slump have ironically been opposite-the US dollar Index fell!
Our correlation trade extrapolates to falling global stock markets and commodities along with a rising US dollar index (flight to safety) where a higher US dollar index would have signaled 'tightening liquidity'.
But this doesn't seem so. Hence the continued buoyancy in most stock markets.
The US stock markets ended lower last night but hardly reflected on SSEC's crash.
So if the US dollar index persist on weakening amidst sagging global markets, they are likely to signify an "interim pause" and not a major reason for a collapse.
And this should also apply to commodities.
As we see from the Russian experience, where the RTSI earlier fell by 30%, the Russian benchmark have managed to recover most of its loses and now trades above the 50-day moving averages.This looks likely the paradigm for the SSEC than for a major meltdown.
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