Four-time badminton world champion Lin Dan is on track for yet another medal in London. Will his country's stocks also medal? Photo: Li Ning

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

At last count, China was leading the medals table in London, tops in both golds and overall.

With the US and France nipping at the PRC’s heels and scandal for the badminton team, it is another matter altogether whether the world’s most populous country can hold onto its lead.

Another question on the minds of both sports fans and investors alike is whether or not China’s equity markets will perform nearly as well as the country’s athletes at the Summer Games.

It’s an even more pertinent question given the fact that the benchmark Shanghai Composite Index – the chief tracker of A- and B-shares listed in both Shanghai and Shenzhen – is down over 22% from a year earlier, and has been one of the world’s worst performing benchmarks year-to-date.

To find out if there’s an Olympic “bounce” in store for the PRC, Sinafinance pooled the opinions of no fewer than eight brokerages:

Jinzheng Securities said that the volatility at the beginning of this trading week is likely the sign of more to come.

Cyclical stocks led a recent charge, including non-ferrous, coal and cement, with others like rare earths, lithium-ion batteries and water plays also adding noticeable value.

And the fact that 10 counters hit their daily allowable upside limits in one day means there are once again money-making opportunities in the market.

In summary, the benchmark Shanghai Composite Index is currently down a fifth from a year earlier, so a headline-making resurgence is possible at any time.

Xiangcai Securities said that the sharp correction earlier this week let a lot of hot air out of the market.

But this only meant that something closer to true, intrinsic values might start revealing themselves with more clarity going forward.

A setback like this is vital, the brokerage said, to building an across-the-board base level of support from which to initiate a possible bounceback for the bourse.

Unlike Chinese athletes in London, the PRC's bourse has been far less sporting

Damo Investment said it expects a rebound in Chinese shares sooner rather than later, but that the scale of the bounce will likely leave the lion’s share of investors unsatisfied.

Helping matters was a string of statements on Wednesday from top executives of listed firms expressing guarded but long-awaited confidence in business prospects and capital market sentiment for the remainder of the year.

Also, it almost goes without saying that a technical rebound is overdue for the Shanghai Composite Index, given that it was the worst-performing major index worldwide since the beginning of the year.

But the brokerage warned that the anticipated recovery would be delayed or minimized if further supportive action from Beijing was not forthcoming.

China Finance Online said Wednesday’s sharp opening fall followed by the post-lunch recovery is a sign of not only market volatility, but lack of clarity on the direction of the economy and the string of interim earnings statements now flooding in-boxes and financial pages.

It said the performance of key counters in the financial, property, coal and non-ferrous segments over the next few days will drive the market, for better or for worse, given their huge weight in the market and their heavy reliance on credit availability.

Dongwu Securities said it wasn’t ruling out a major mini-bull run over the short term, but the extent and duration of the long-awaited surge would likely be limited.

It said its major concern was the still tepid daily trading turnover, which strongly suggested that investor confidence was still hovering at low levels.

The brokerage advised investors not to jump back in too early, but also to patiently hold onto undervalued counters in anticipation of a return to a more sanguine investment climate.

China Merchants Securities said daily trading turnover was key.

It added that at least 80 billion yuan must trade hands on the Shanghai Stock Exchange daily to provide any meaningful recovery in the benchmark index.

Beijing Capital Securities also said it was keeping a close eye on daily trading volume more so than any other market metric.

Finally, Guangfa Securities said Wednesday’s sharp climb from recent falls can really only be seen as a technical bounce, and investors shouldn’t get too excited.

It said that if more policy support were to suddenly come out of Beijing, then investors would see a lot more days like these.

See also:

POOF! 1.7 Trillion Yuan Gone From China Mkt Since May

CULTURAL REVOLUTION? 30 PRC ‘Culture Firms’ About To Go Public

OLD MAN, NEW MONEY: Meet China’s Nearly Century-Old Investor

Five China Sectors About To Get Hot

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