China’s Stock Market Experiences “A” Correction

Posted on Jun 26 2015 - 11:37am by Sharpe Trade

So each morning, I peruse the net and various media sources to try to find out what I missed while I was sleeping.  I wake up this morning to discover that financial media outlets are proclaiming that Chinese markets are crashing into the ground.

Hmmm.  ‘Not really a surprise‘, I think to myself (more on that later).  Regardless, I decide to pull up a chart of the Hang Seng Index, to see how bad the blood-letting really is.  And I quickly discover that the Hang Seng is down …

1.78% today

Are you kidding me?  That’s it?

Well, that’s the Hang Seng, so let’s go over to the Shanghai Composite Index.

That looks a little more like a hard correction today, although it’s only down 7.48% in one day (we consider a hard correction 10% in one day).  But without a doubt, it has experienced “a” correction, when we look at Chinese markets in the last month.  Down, something like 18% in the last month.  So, spread out over a months time, we’re getting close to that magic “20%” number.

But crashing?

China?

Really?

For those of you who are new to the markets of the last few years, allow me to let you in on a little truth here.

This is sort of what Chinese markets ‘do’.

They explode, wildly, higher.  During which time, know-nothing pundits proclaim that China will soon rule this quandrant of the galaxy. Don’t get me wrong.  There is a lot of money to be made there, if you like that sort of volatility.  That’s just not my bag.  But my point, is that during this ‘upside volatility’, as happens in bull markets, wild claims are made.  Simply because … well … that’s what people do in bull markets.

And let’s not call this a ‘crash’ just yet.  Yes, Chinese markets have experienced a correction.  If we look at the last month, a hard correction.  And they still may crash. However …  the Shanghai is still up over 100% in the last twelve months. 

However, returning to an earlier point?  I would not be surprised to see this turn into a more prolonged crash.  Because where you find upside volatility, you also find … you guessed it … downside volatility.  Very often Chinese markets spend very little time in consolidation, and then they drop, just as wildly as they exploded higher.  This has been occurring for as long as I’ve been investing.

So am I wary of Chinese markets moving forward?

Of course I am! Would I buy this correction?  No way. I don’t play in those sort of markets.  Some do, and I wish them the best.

Let’s just keep things in perspective and please remember …

This is sort of what Chinese markets ‘do’.

1 Comment so far. Feel free to join this conversation.

  1. NewLife July 1, 2015 at 3:48 pm - Reply

    7% is newsworthy. 1.5%? Doesn’t seem like a huge deal. But, they gotta write something I guess.

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