On June 12th, the Shanghai Composite closed at 5,166.35 – its highest close in 7 1/2 years. Later that evening, NIA sent out an alert to its members calling a top for China stocks, with NIA boldly predicting in the subject, “China Stocks to Fall 66%!” In just 10 trading days since NIA’s perfect top call and prediction of a 66% decline – the Shanghai Composite has declined by 21.51% to 4,054.86, which is its largest 10-day percentage decline of the last 15 years! Last night, the Shanghai officially entered bear market territory.
The Shanghai’s 14 IPOs from January/February 2015 (excluding 4 additional IPOs that have been halted for over a week) are now up an average of 260.3% from their IPO prices. One week ago, they were up an average of 349.2% from their IPO prices. At each company’s individual 2015 peak, they were up an average of 537.02% from their IPO prices – but have since declined from their 2015 highs by an average of 44.15%.
When NIA perfectly called the top of the Shanghai Stock Bubble on June 12th, it explained that Chinese listed stocks over the trailing 12 month period experienced a total market cap increase of $6.435 trillion, a new global record that surpassed the previous record increase of $5.811 trillion that was set by US listed stocks during the 12 month period of April 2009-March 2010, immediately following their financial crisis bottom set in March 2009.
NIA further explained how Chinese listed stocks in May 2015 accounted for 56.07% of all global stock market dollar volume – a new record high vs. US listed stocks in May 2015 accounting for only 24.03% of all global stock market dollar volume – a new record low. NIA even provided its members with its own exclusive proprietary data/chart of how China’s stock market had a trailing 10 1/2 year volume weighted average market cap of $3.536 trillion vs. its then total market cap of $10.272 trillion. NIA showed how historically, Chinese listed stocks have consistently returned to their volume weighted average market cap!
As of June 12th, Chinese stocks needed to decline by 65.57% from their total market cap of $10.272 trillion to reach their volume weighted average market cap of $3.536 trillion. This was extremely similar to late-2007, when China’s stock market topped out at a pre-financial crisis peak market cap of $4.479 trillion vs. its then volume weighted average market cap of $1.451 trillion, which Chinese stocks needed to decline by 67.6% to reach. Over the following 10 months, Chinese stocks declined in market cap by 62.4% to an October 2008 bottom of $1.684 trillion or less than 2% below their then volume weighted average market cap of $1.716 trillion!
After NIA’s extremely successful/accurate June 12th alert, the Shanghai Composite Index declined the following week by 13.32% to 4,478.36. On June 20th, NIA sent out an urgent update entitled, “Shanghai Stock Market Crash Has Begun!” NIA warned that despite the Shanghai Composite dipping 13.32%, Shanghai Margin Debt had actually increased during the previous week by 1.77% to approximately USD$239 billion – equal to a record 4.22% of the Shanghai Stock Exchange’s Market Cap, which was 164 basis points above the NYSE’s latest Margin Debt/Market Cap Ratio of 2.58%. One year earlier, the Shanghai Margin Debt/Market Cap Ratio was only 1.64% or 78 basis points BELOW the NYSE’s Margin Debt/Market Cap Ratio at the time of 2.42%.
Shanghai Margin Debt finally declined last week by 6.46% to $224 billion – its largest weekly percentage decline of the past year!
Check out this updated chart of the rise, peak, and reversal of the Shanghai Stock Bubble vs. the 2000 NASDAQ technology bubble. It is amazing how closely the Shanghai Stock Bubble followed the trend of the 2000 NASDAQ technology bubble – with both peaking exactly 299 trading days into their respective rallies, despite the two bubbles being over 15 years apart from each other!
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