The second point to note and dismiss is the notion that changes in government policy solely drive the Chinese market. There is no question that the market reacts to changes in government policy, but this reaction is not unique to China. Global markets hang on the outcome of US banker’s meetings and Jackson Hole, the annual economic symposium held in Wyoming, organised by the Federal Reserve Bank of Kansas City. They react strongly to changes in interest rates.
What should be made of the 36% rise in the Shanghai Index following policy change announcements on Sept 24? The first feature to note is that rallying is a characteristic of the Chinese market’s behaviour.
Ultimately, it is unsustainable, so the retreats in recent days come as no surprise. The retreat and rebound pattern will set the second anchor point for a new and sustainable uptrend. However, the second anchor point may involve a retreat of 10% or more, followed by a rebound.
