Volatile coal prices might provide a spark to China shares.
Photo: Abterra

Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance

SHAREHOLDERS HAVEN'T EXACTLY been taking the fast boat to China recently.

In fact, it's been quite slow.

Chinese shares have plummeted 66% over the past five years, 27% since 2009, and nearly 9% since the beginning of July.

During this weeklong break, where do four market watchers see things headed?

Hunan Securities said the trough has no doubt been tested and retested, and the fact that the Shanghai Composite has been the world’s worst major bourse benchmark index performer this year -- while depressing on its own merits -- can only mean that a sustained technical catch-up and rebound is long overdue.

The central China-based brokerage said that investors in Shanghai and Shenzhen-listed A-shares were fully expecting a bounceback sooner rather than later and the bulk of shareholders were holding their current positions in anticipation of just such an oft-seen phenomenon.

“Since breaching the ultra-key 2,000 level, it has been assumed to be a defensible vanguard position upon which to build more momentum.

"Since the market has been so volatile of late, this key psychological level takes on more importance, in a way, than even the moving averages of whatever duration,” the securities firm said.

GICC Securities said that given the unpredictability and capriciousness of the benchmark these past few months, investors were growing weary of doing due diligence research on valuation history of established listcos and were more likely to look elsewhere.

China shares are clamoring for a comeback

“Shareholders are getting disappointment and surprise fatigue. Told repeatedly that a particular counter was on the rise and only to be disappointed the next trading session, it is only natural that gun-shy investors will look for fresh stocks with no dubious track records,” the brokerage said.

BOCI said it is pinning a lot of hope on coal price volatility, still the source of around three quarters of China’s electricity generating plants’ feedstock.

Measures by a myriad of provincial government authorities to protect local coal mining conglomerates by restricting transport and supplies will drive up prices for China's most popular input for electricity and steelmaking.

And given the numerous coal producing and transporting firms listed in both Mainland China and Hong Kong, it is little wonder that this humble commodity plays such an important role in the direction of the benchmark index.

Taiyuan Securities has a different take on where the A-share markets are headed after the upcoming one-week national holiday.

“As the markets boil and burst over and over again, it is important to get back to fundamentals.

"Hoping to ride a market rumor to riches is so 2007 and investors would do very well for themselves to refocus on boring, staid, solid, steady and reliable intrinsic or untapped value plays,” the brokerage said.

See also:

DRAWN & QUARTERED: Miserable Q3 For China Funds

PARTY OVER? Dual-Listcos Much Better Off In Hong Kong

FAB FIVE: Which Themes Are Driving China Rally?

EVERYBODY’S HURTING: Third Of ChiNext Firms See Plunging Profits

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