As you can see below, China is performing much more poorly than the U.S. market, but its not just that. It is performing much worse than its foreigners only market, the H-shares market traded in Hong Kong. This just goes to show you that the same stock, traded on different exchanges, can trade at a big premium or discount based on liquidity.
Obviously, mainland China has tightened up on the liquidity, as Hong Kong and the rest of the world has kept it flowing.
This is an example of how powerful liquidity can be in the short-medium term in affecting asset prices.
Shanghai Composite in blue, S&P in red, H-shares Index in green.
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1 comment:
China and Brazil declined first, but they also bottomed first, which is how emerging markets are suppose to work.
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