Dilemma of The Chinese Market

The shanghai composite reached a record high of 15,046 in May 2015. This could be attributed to massive and excessive Quantitative Easing which was embarked on by the Peoples Bank of China (PBOC). This monetary policy was effective at driving and boosting economic growth and development across china. This saw massive improvement in economic activities and most importantly international trade. Over the last couple of years, we saw a huge inflow of investment into the Chinese market which has helped to improve the value of the composite to a peak of 15,046.

Normal market behavior as expected; it goes up and down. This is how every normal market reacts to market trend. This is nothing to worry about. Since the beginning of June, the Chinese market has been on an aggressive sell off by investors. The index has dropped more than 14% since it reached its peak in May.

Here some things I could say about The Chinese Market:

1. It is not a free market which plays on demand and supply forces. Government intervention is an attribute of the Chinese market.
2. The composite dropped more than 8% in a trading session.
3. Immature investors dominate the Chinese market. They do not expect a swing, they want a continuous rally.
4. No short order is allowed.
5. Shanghai market puts down pressure on all commodities.