As we have been outlining for months, the single most important driver of the Chinese equity markets is nothing else than speculation, i.e. China margin trading debt, represented by the white line in the chart below.
While the world remains obsessed with the trade talks, the speculation among the Chinese (margin trading) continues to move in tandem with the CSI 300.
Interesting to note though, is that lately the “speculation” has continued to rise, while equity markets have been moving side-lines/small down. What probably should be of concern is that despite the continued increase of margin trading, the markets have not been able to take new highs.
Remember that things could get rather interesting should the Chinese speculator decide to reverse longs, especially as equity volumes have been on a steady decline for weeks now.
Mind the gap.
Source, charts by Bloomberg