The Weekly Brief (06 July 2015)Contributor Global Markets Insights Strategy Team
In recent weeks the Chinese stock market has hit the headlines for all the wrong reasons.
Major indices have fallen significantly, with the Shanghai composite, for example, now down over 20% from its recent peak. Such was the scale of the run up, key indices of Chinese equities remain up by double digits since the start of the year. But where to now? Although there were pauses on the way up, history suggests that now the tide has turned, further downside awaits. This latest evolution in share prices bears a striking resemblance to the rally in Chinese equities that started in 2007 and lasted throughout that year. The similarities are so great that the correlation between the two series is almost perfect. Buyer beware.
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The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future.