Sunday, August 16, 2009

Is Chinese Stock Market Going to Burst?

Chinese Stock market made a bubble again, it rallied over 95% since Oct 2008 low (10676.30). That was due to a big sum of liquidity available to lend that caused +95% rally in Hang Seng Stock Index and +109% rally in Shanghai Composite Index. As you know last bubble burst back in Oct 2007, which caused a huge drop, this time Chinese are trying to stop the equity bubble burst. They hope by tightening the lending the bubble gently deflates, but in real world bubbles usually burst, people will race to exit before others do therefor they cause the bubble to burst. it's almost impossible to stop the bubble from bursting. We will soon find out if Chinese succeed or not.