There are those who say our focus on the Shanghai stock market index is overdone, dear readers, but if ever there was a week that indicated that the movement of the index is enlightening in terms of gaining a sense of what’s going on here in the inscrutable Middle Kingdom, this was it.
With the dragon boats snugly back in their boat sheds for another year, the week began with a tepid Monday ahead of the Big Announcement – would MSCI include even a sprinkling of Shanghai A-shares in their global indices? If it happens, as it inevitably will one day, there is a lot of money around the world that will have to buy A-shares to match the MSCI index weightings. But early on Tuesday morning China time, they announced that… no, yet again, China’s markets and regulatory practices were not ready for the big time. Presumably meaning that allowing in a major market that operates to a significant degree according to non-market forces was too risky for the entire structure. This was a pretty big negative for the market, right? Right. So what happened on Tuesday? You got it, Shanghai stocks rose 1.8% or so.
That June 15 happens to be the birthday of the head of the party couldn’t have been a factor, could it? Unlikely, it’s true. But still worth a moment’s thought. It’s probably just the national team sending its usual message to the market – bet against us and you might lose on the deal. Have a good weekend!
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