Postcard From No 528

Wobbling on the liquidity high wire

  • Published 20 Aug 2009

With Shanghai's stock rally faltering this week, the fragility of the market's psychology has been laid bare.

This week, the world got a view of how Chinese investors really assess the sustainability of their share price rally. On Monday August 17, the Shanghai Composite Index fell 5.8%, sending shockwaves of concern around the world. On Tuesday, things stabilised a bit with a 1.4% rebound, but the index remained below the important 3,000 point barrier. More importantly, the cat is out of the bag – the fragility of the market's psychology has been laid bare.

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