Shanghai se Composite Index & The Margin Trading Story

shanghai se composite index

Shanghai SE Composite Index Outlook

Updated Aug 2019

Some experts are claiming that stocks in China have rallied sharply from their lows because of state-backed entities such as the unit known as the “National Team”, which is equivalent to the PPT  (Plunge Protection Team) in the U.S. Even if this is the case,  why point a finger when we are guilty of the same scandalous game? We taught the World that propping the markets is the way to go when one is trying to mask economic weakness. Our economic recovery is a hoax and is supported by hot money. Take away the money, and the recovery ends.

Must Read: Fed’s primary objective to Manipulate Masses & Markets

However, we feel the reason that the markets are moving higher is that astute individuals have stepped in to open long-term positions; they recognize a great deal when they see it after all the Shanghai Index shed over 50% from high to low.

Margin trading comeback could propel Chinese Markets Upwards

The chart above illustrates how strongly the Shanghai Index pulled back; history clearly indicates that the best time to buy is when blood is flowing in the streets. And one can safely assume that a lot of blood flowed in the streets and is still flowing after this back-breaking correction.

However, an additional factor could provide even more fuel to the current rally as Margin rules are expected to be eased once again.

Has The Shanghai SE Composite Index Bottomed or

Bloomberg states that the CSFC (China Securities Finance Corporation) will start offering loans again for  7 to 182 days.  This announcement was later posted on the CSFC’s website, and interest rates will be in the 3% range, which is relatively low and will most likely attract a lot of speculators.

“The loosening could reignite interest in the equity market, particularly as the regulators’ actions last year — to rein back private sector broker leverage — helped trigger the correction in equity prices,” Koon Chow, senior macro and currency strategist at Union Bancaire Privee in London told Bloomberg. “It does look like they want a second chance at growing the equity market. We shall all be watching very closely whether leveraged buying of the equity market balloons again.”

We have been stating all along that China makes for a great long term investment as it is set to become the world’s largest economy.  Astute investors should start compiling a list of stocks now and slowly opening long term positions in blue-chip companies or corporations that have strong quarterly earnings growth rates.

“The potential risks could be the brokerage firms misusing the leverage,” Wayne Lin, a New York-based money manager at QS Investors told Bloomberg. “If they use it for market-making then it’s good. If they use it for speculation, then it’s bad.”

Yes, the potential for abuse is always there, but that has not stopped Western firms from offering margins, and our markets are still doing well. Market booms and busts are part of the scheme the Federal Reserve orchestrates, and they are here to stay until the Fed is eliminated. Unfortunately, we do not see that happening anytime shortly; so the best game plan is to view all so-called market crashes as buying opportunities.

Tactical Investor China Stock Market Outlook Update Aug 2019

The above views were held back in 2016, and the Shanghai SE Composite Index did mount a rally, which then fizzled out due to the tariff war.  Things don’t appear to be easing up; take a look at the latest chart below:

Shanghai Composite Index;; no sign of a bottom in 2019

The index has put in a lower high, as indicated in the picture, and the momentum could change at any point as it appears poised to test its lows again. If 2920 is taken out on a monthly basis, It should lead to a series of new lows before a bottom is in place. At this point in time, we would avoid committing significant funds to China, but one can invest in individual stocks or ETFs that are defying the trend. For example (at least for now), NTES and TCHEY appear to be holding up well, while BABA is taking a beating.

Other Stories of Interest:

What is Market Behavior

What is Market Behavior? It’s Not the Question—It’s Time to Act

What is Market Behavior? Stop Wasting Time and Start Taking Action Nov 4, 2024 The Market Maverick's Manifesto: Where Ancient ...
Power vs Force:

Power vs Force: Understanding Why Power Consistently Prevails

Power vs Force: The Enduring Strength of Wisdom Over Domination Oct 29, 2024 Prelude to Power: The Eternal Duel Few ...
Benefits of Investing Early: Building Wealth and Achieving Peace of Mind

Benefits of Investing Early: Wealth and Serenity

Benefits of Investing Early: Building Wealth and Achieving Peace of Mind Oct 29, 2024 The Quiet Alchemy: Unleashing the Power ...
"Escaping the 9-5 Rat Race: Freedom or Endless Toil?"

9-5 Rat Race: Work Until You Die or Break Free?

Breaking Free from the 9-5 Rat Race: Investing for Financial Freedom Oct 25, 2024  Intro: Breaking Free: The Art of ...
Collective Euphoria

Collective Euphoria: How Madness Fuels Financial Disaster

Collective Euphoria: When Mass Hysteria Leads to Financial Ruin Oct 24, 2024 Introduction: The Seductive Allure of Boundless Optimism "What ...
Strategic Ignorance: Where Rational Math Meets Market Madness

Strategic Ignorance: When Math Collides with Market Madness

When Mathematics Meets Madness: The Hidden Patterns of Market Psychology Oct 24, 2024 The Paradox of Certainty In 73 BCE, ...
Uptrend Stocks

Uptrend Stocks: Embracing the Renaissance of Market Prosperity

Uptrend Stocks: Navigating the New Era of Market Prosperity Oct 24, 2024 The Invisible Choreography: Unveiling the Dance of Markets ...
Overtrading: The Perfect Burro Formula

Overtrading: A Foolproof Recipe for Becoming a Burro in the Markets

Overtrading: The Perfect Burro Formula for Financial Failure Oct 23, 2024 The Siren Song of Market Euphoria Picture this: It's ...
Mob Psychology

Mob Psychology: Breaking Free to Achieve True Financial Success

Mob Psychology: Rise Above for Financial Freedom Oct 19 2024 When a crowd transforms into a mob, reason dies a ...
What is the bandwagon effect. Silly people following Simon

What is the Bandwagon Effect? Exploring Its Impact

What is the Bandwagon Effect? Unravelling Social Influence & Cognitive Bias Updated Oct 19, 2024 The bandwagon effect is a ...
Hidden Positive Divergence: The Unsung Hero of Technical Analysis

Hidden Positive Divergence: Harness Its Power to Dominate the Markets

Unlocking Hidden Positive Divergence: The Secret Weapon to Outperform the Markets Oct 18, 2024 Introduction Imagine the potential for remarkable ...
Gold as Currency: Winds of Change Are Brewing

Gold as Currency: A New Dawn?

Gold as Currency: Winds of Change in the Global Economy Oct 18, 2024 The world of finance is a fickle ...
Stock Market Correction History Illustrates Dow Crash Is Illusory

Stock Market Correction History: Decoding Illusions Behind Crashes

Stock Market Correction History: Unraveling Crash Illusions Updated Oct 17, 2024 Introduction: Market Movements are Inevitable When blood flows in ...
Why Saving and Investing Matter

Why Saving and Investing Matter: Avoid Ending Up Broke and Stranded

The Critical Importance of Saving and Investing: Protect Yourself from Financial Ruin Oct 16, 2024 In today’s fast-paced world, financial ...
Why You Should Not Panic During a Market Crash: A Deep Dive Into Mass and Behavioral Psychology

Why You Should Not Panic During a Market Crash: Unraveling Mass and Behavioral Psychology

Stay Calm During a Market Crash: Insights from Mass and Behavioral Psychology Oct 15, 2024 Introduction: The Emotion-Driven Markets Market ...