By Elliott Wave International
With China’s main Shanghai Composite index up almost 40% this year, and the tech-heavy Shenzhen Composite index up more than 90% YTD, are Chinese stocks in a bubble?
It’s a legitimate question. You’ll find many answers out there, but this answer you won’t want to miss.
This answer comes from Elliott Wave International’s own Mark Galasiewski, the editor of EWI’s monthly Asian-Pacific Financial Forecast. Mark is on record for turning bullish on Chinese stocks almost a year ago, exactly on July 3, 2014. In that month’s issue — and at the time when almost no one was bullish on China — Mark wrote:
“If the [Shanghai Composite] index breaks out above the upper channel line — which runs through 2100 in July and which is about 2% above current levels — then the multi-month uptrend that we have been expecting is likely under way.”
Getting back to the question if Chinese stocks are in a bubble — below, you’ll find a link to a free special report where Mark gives you his answer in full detail. To give you a taste, here’s an excerpt from Mark’s June 2015 Asian-Pacific Financial Forecast:
How to think like a billionaire investor
“The view that China’s stock market rally is a bubble…stands in contrast to the view of Stan Druckenmiller, a billionaire investor described by Bloomberg as having ‘one of the best long-term track records in money management.’ He explained his reasoning for turning bullish on China’s economy this way: ‘Whenever I see a stock market explode, six to 12 months later you are in a full blown recovery.’ (April 15, 2015)
“Elliott wave analysts appreciate that logic as well. Stock market booms and busts do not come out of nowhere. Rather, they are inevitable by-products of human nature and are patterned according to the Wave Principle. China’s current bull market is not a product of government stimulus or of investor ignorance or — as a prominent short-seller told CNBC this week — ‘the largest pump and dump in history.’ (Bloomberg, 6/1/15)”
This article was syndicated by Elliott Wave International and was originally published under the headline Chinese Stocks: “How to Think Like a Billionaire Investor”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.