Are Chinese stock gains sustainable?

CHINA FINANCIAL - Report 28 Feb 2019 by Michael Pettis

Special points to highlight in this issue:

* The Chinese stock market may well continue to deliver outsized returns for the rest of 2019, and if I had to bet, I would bet that it will perform well, but the recent rise has been all technical and there are no fundamental reasons driving the bull market of the past month. Any stock market recovery remains fragile, and expected volatility should be extremely high.

* Very few foreign analysts seem to have noticed the speech President Xi Jinping made last Friday to a group study session of the CPC Central Committee Political Bureau in which he called for “supply-side structural reform”. Many very knowledgeable Chinese bankers have noticed, however, and the implications may be quite significant for the financial services sector.

I had originally planned in this issue of the newsletter to list the various economic paths that China can follow over the next few years and discuss the likely conditions and consequences associated with each path. Because of the soaring stock market, however, I decided to postpone that discussion for a week or two and focus in this issue on the stock market, along with expectations for the market over the rest of this year. ​

Now read on...

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