Home Capital China Focus

China's market interference is not unique: Guppy

Daryl Guppy
Daryl Guppy8/5/2021 04:28 PM GMT+08  • 5 min read
China's market interference is not unique: Guppy
These general market sell-offs are a buying opportunity for some stocks.
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

The Shanghai market collapsed dramatically last week in response to a government announcement in relation to the education coaching industry. The excessive market response was driven in part by the increasing influence of large-scale Western funds invested in China. Many of them lack real China expertise, so the tendency to overreact is understandable. The sell-off, like all market sell-offs, was further amplified by the activity of ETFs, which actively rebalance in response to market movements. This tends to create market over-reactions.

The sell-off has two factors for investors to consider. The first is the opportunity for bargain-hunting. The second relates to sovereign risk.

Bargain-hunters gather when markets get smashed because in this situation, good stocks get taken down along with every other stock. These general market sell-offs are a buying opportunity for some stocks. This week’s rebound in the Shanghai Index has as much to do with bargain-hunting, as it does with the soothing comments from the ViceChairman of the China Securities Regulatory Commission when he hosted a virtual call with global investment banks.

For more insights on corporate trends...
Sign In or Create an account to access our premium content.
Subscription Entitlements:
Less than $9 per month
Unlimited access to latest and premium articles
3 Simultaneous logins across all devices
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.
Unlock unlimited access to premium articles with less than $9 per month. Subscribe Now