China stocks

Since I do not have Bloomberg any more, I do not keep track of stock market indices on a daily basis. Hence, it was a surprise to find that Shanghai Composite and Shenzhen Composite indices were up 40% YTD slightly outdoing India and Indonesia. Up to end-July or even end-August, Shanghai Composite was flat for the year or slightly down. This is quite suspicious. I wonder if the China government felt that it was a loss of face for them to be eclipsed so comprehensively by India and Indonesia stock markets.

If one looked at MSCI China index, it is up only 3.86% YTD. Annualised 5-year return is -0.41% whereas MSCI-India’s comparable figure is 2.6% and MSCI-Indonesia is 5.5%.

Further, this year’s performance of MSCI-India is 29.1% and MSCI-Indonesia is 24.4% and they are consistent with the performance of benchmark indices. China’s is vastly different.

Performance of China stock indices in the last three to four months appears artificial, suspicious and hence unsustainable, in my view.

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One thought on “China stocks

  1. The stock market rally is about asset reallocation by global investors (due to tie-up with hong kong), not about bets on China’s growth.

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