Prepare for the ride ahead
China’s domestic stock market is the 2nd largest in the world after the US. Since 2007 when the stock market reached bubble territory and peaked we have seen the ensuing bursting of a bubble.
Looking at the CSI300 below we can see that we are in the midst of a C wave down that will take the market below levels last seen before the bubble began.
Longer term charts of Shanghai Composite shows a similar pattern.
The Shenzhen Composite, consisting of higher beta, smaller cap stocks managed to retrace most of its A wave drop during the 2009-2010 B wave rally. However it should continue its downtrend as the C wave bear market continues.