In an era of performance chasing and “tactical trading,” holding on to a buy rating for seven and a half years shows commitment. But even loyal Morgan Stanley has downgraded China’s stock market. Other brokers are making cautious noises, too. A flurry of capital raisings and initial public offerings suggest that companies also think this is a good time to sell. Worries about speculative froth are focused on high levels of margin debt in retail trading accounts. In the past three days China’s markets have swooned.
Bears have the momentum, then. But they should be careful. The authorities are against them. Central and local governments do not want a market collapse added to the list of threats to growth and, as major holders of financial assets, will act to protect their own balance sheets.
So official Beijing mouthpiece Xinhua has said that financial reforms and easing measures would keep the bull market going. And fiscal measures have been added to the liquidity tools already employed in stimulating the domestic economy.