Technical & Fundamental Oil Reports Specialists

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Where China leads others follow

Published Tuesday, July 28th, 2015

Manic Monday is an apt description of yesterday’s trading, led by another Chinese stock market meltdown. Having fallen by 30% earlier this month and then rebounding 16% solely on the basis of government support the Shanghai Composite shed 8.5% yesterday leading stock markets across the world down with it. China experts are split on whether the Chinese stock market turmoil is merely a local problem to be observed rather than alarmed about or whether it is indicative of something much deeper of the hard landing variety.

Perhaps it was coincidental that yesterday’s fall followed the release on Friday of another China flash manufacturing PMI of below 50. Perhaps it was prompted by rumours of the Chinese government withdrawing support. It is serious food for thought that the collapse came despite prohibitions preventing big players from selling and dire warnings of the consequences of any “malicious” short selling.

Any market which is dependent on artificial support is riding for a fall and vulnerable to rumour induced panic. If prices are not determined by the normal forces of supply and demand they cannot be trusted and are not sustainable. It is one of the reasons there has been so much doubt about Western stock market record highs brought about by QE.

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Posted by David Hufton