Why Would I think the China Stock Market will keep falling

Altough the market is operated by people with irrational emotion, the market always follow the rational path.

Why the Stock should go south?
1. 2nd quarter GDP is very low, 7.6%, no sign of the bottom yet.

2. FDI is decreased by 0.7% compare to last month(June)
3. House price is up in 49/70 cites, which will limit the government's ability to lower the interest rate
4. import and export is also very weak
5. 1h majority of banks report profit decrease and bad loan increase (Aug 26)

Why the Stock should go north?

1. The stock has been falling for almost 3 years.
2. PE is very low on some good value stocks

I think the Stock market will keep bearish for a while until some positive signals are released from government. Also the US fiscal cliff, and euro issue will have impact on Chinese economic.

*In 2008, Stock reached the bottom earlier than the economic bottom. about 1Q earlier

updated on Aug 26,2012