Analysis | What goes up must come down: Shanghai stock index poised for decline as daily turnover touches historical turning point
Last three declines in the benchmark – when trading values were above 300 billion yuan – were in August and November last year, and this April, with each lasting a month
Chinese shareholders should probably brace themselves for a decline, if recent trading value history is any guide.
Daily turnover on the Shanghai Composite Index (SCI) overtook 300 billion yuan (US$46 billion) this week, suggesting the benchmark could be set to decline, judging by previous form.
Trading values have risen above that threshold three times over the past year, and in each case the index fell into a month-long decline of more than 4 per cent, according to data compiled by the South China Morning Post.
Should that pattern be repeated this time round, it would mean the SCI’s 11 per cent rally since May could now be set for a pause.
Wei Wei, a trader at Huaxi Securities in Shanghai, reckons rising stock turnovers point to increasingly split views among investors, as more shares change hands.
