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The garment industry in China has been hard hit by weak external demand and a slowing domestic economy. Beijing announced on Thursday that industrial profits from all sectors dropped in August for a fifth consecutive month.
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Translated by Andrew Vanburen from a Chinese-language piece in IFN

INVESTORS IN CHINA'S stock markets will be happy to bid farewell to September, but they don't have much better news on the way next month.

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

And October won’t provide much in the way of market miracles.

The benchmark Shanghai Composite Index did gain a head-turning 2.6% on Thursday.

But given the recent bloodletting, analysts were expecting a technical bounceback to come sooner rather than later.

This modest recovery doesn’t remove the spotlight from Chinese shares and the fact that the Index dipped below 2,000 points earlier this week, the lowest level since March of 2009.

Such a prominent buoy is bound to elicit interest from the bottom seekers, that is the large body of market watchers who firmly believe that breaking through such a “psychologically significant” watershed level such as 2,000 can only signal that the true nadir has been reached and it is time to start accumulating as a sustained rebound was inevitable.

Not so fast...

If the bottom of the valley had been reached, then why weren’t the more daring adventurists of investors out there rushing in to snap up bargains?

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Have Chinese shares finally reached bottom?



Apparently, the major hemorrhaging on Wednesday came as a bit too much of a surprise for investors, even though it did allow a glimpse of what life sub-2,000 would look like.

And rather than ushering in a rush to realize bargains in the afternoon session, it looks like it came as more of a shock and scare to shareholders who opted to stand idly by on the sidelines until the dust cleared.

Therefore, it appears that fear and dread trumped the potential for a true recovery after the significant selloff.

From this market behavior and reaction, it can only be surmised that things aren’t looking especially good for bourse activity following the upcoming week-long stock market shutdown during the combined holidays.

And following the National Day/Mid Autumn Festival nine-day vacation, October will already be nearly one third over with the remainder of the month not looking particularly promising.

The recent stimulus cum quantitative easing measures by the world’s top three economies – the US, China and Japan – actually did less than expected to provide upside lift, especially to equities listed in Shanghai and Shenzhen.

Therefore, with the macroeconomic moves over and done with and third quarter reporting season still a month away, there seems precious little in the pipeline to provide buoyancy to China’s two bourses in October.

And with tensions ratcheting up between Beijing and Tokyo over the territorial dispute, it seems like the only news to look forward to might not be all that buoyant at all.

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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