At least Australia’s finance media are consistent – we nearly all missed the Shanghai stock market “crash” the day it happened, so it’s only reasonable that we nearly all missed the Shanghai surge as well.
Yesterday Shanghai wiped out the last of its correction, closing at a new record high , up 14% for the year and ahead 160% since the beginning of 2006.
The joke is that the 9% fall on 27 February was nothing to worry about, despite the screaming headlines around world (including here, eventually), but the sharp recovery is.
It confirms that China’s stock markets remain little more than casinos in urgent need of reform – but Beijing has been scared off taking the necessary action.
As previously reported, the Shanghai and Shenzhen markets have very little to do with the Chinese economy and are by no means a proxy for it. Nevertheless, the “China syndrome”, having established itself in the minds of at least some international investors, will inevitably reoccur – that’s guaranteed.
And, having shown how easy it is to drop 9% in a day and recover it in three weeks, the next ride is likely to be wilder again. At some stage Beijing will have to act but the longer it waits, the bigger and more powerful the feral exchange will grow. A nice capital gains tax on the casino winnings would be entirely reasonable, but it needs to be done now, if not yesterday.
Much of the “Shanghai sneeze” coverage was in keeping with the voluminous misreporting of Chinese policy when attempts to sustain growth by bringing it off the boil to a healthy simmer are usually turned into headlines about the end of the Chinese growth miracle, the collapse of the commodities boom and death and destruction for Australian mining investors.
If only we could sleep through those beatups as well.