Where did the argument for China A-shares go? In the past two weeks the case for the booming stock market of mainland China has turned at least two somersaults. First, the main global indexing groups decided, against much expectation, not to include A-shares in global indices just yet. Then authorities announced moves to tame margin debt. And then came a tumble as the Shanghai Composite, up about 150 per cent in 12 months, gave up about 20 per cent in two weeks.
This weekend the People’s Bank of China reduced target interest rates and the reserve ratio requirements for banks, easing lending — the first time it made changes to both main instruments at the same time since the 2008 crisis. This was throwing the kitchen sink at stocks.
The market’s response: savage falls on Monday and then Tuesday morning, followed by a sharp pivot in the afternoon session as Shanghai shares gained more than 10 per cent — drama and volatility on a greater scale than anything wrought in European markets by the Greek crisis.