The parabolic growth of the Chinese markets

Every prudent investor that takes a look to the Chinese market’s charts would be afraid to invest there. But normal people in China doesn’t seem frightened. They continue to buy domestic stocks convinced that everything in the markets will go up. The latest liberalization from the Chinese government, regarding the possibility to buy stocks from Chinese people, seems that has given a strong boost to the Chinese indexes.

To have an idea of what is going on in China, consider that only in the last week of March have been opened 1.7 million accounts of individuals to operate in the markets, some 50% more than the previous week. Many of these people doesn’t have a bachelor degree and even less the appropriate knowledge for such investments.

Hang-seng index chart

Hang-seng index chart

The Hang-Seng index of Hong-Kong that is the most important market in China, is the only one that looks like a normal growing market. The other two important markets, the Shanghai Composite and the Shenzhen Index give the impression of the left part of the  distribution curve of Gauss. Now investors around the world are waiting to see the right part of the Gauss curve in the next 8 months of this year.

Shanghai Composite index chart

Shanghai Composite index chart

So, is the Chinese equity market boom, going to finish just like the Japanese markets on late years eighty? Still today some 25 years later, the Japanese market hasn’t touched that level again, not only but it has still the half of value that it had at the time.

Shenzhen index chart

Shenzhen index chart

On our opinion investors will be a little disappointed just like they were on 1998 when there was a strong expectation that all the eastern economies and markets would have collapse but China’s economy had resisted impressively to that financial crisis. So china will continue to surprise the West. Our days Chinese people are more optimistic than investors around the world and they will continue to buy stocks.

Taking into consideration the percentage of savings, respect to their incomes, the new possibilities they have to buy stocks and their propensity to the gamble, Chinese markets are set for more gains in the next months. There is a high probability that Chinese central bank could intervene on the markets buying shares and bonds. This fact could only add more fuel to the Chinese market indexes.

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