Cosmic Forces

The universe appears to be misaligned for Chinese investors at present, with the balance over-weighted towards the cosmic force of Yáng (bullishness) and under-weighted to Yīn (bearishness).

The concept of Yīn and Yáng, the foundation of Taoism and traditional Chinese medicine, have been pushed aside with investors turning a blind eye to risk as they scramble to make a quick profit.

The two main Chinese bourses, the Shanghai and the smaller Shenzen Composites rose 2.92% and 3.63% yesterday despite a back drop of data showing clear signs the Chinese economy is starting to overheat.

In Shanghai a staggering 719 A shares appreciated yesterday, with only 52 closing down and 68 remaining unchanged.

Experience and education it seems is an issue with many investors new to the notion of share market investing and trading stocks, and few having experienced a realised loss to date.

This was reinforced by the assistant president of the Central University of Finance and Economics, Shi Jianping, who was quoted in the national Chinese media yesterday noting that individual investors lack a sense of risk.

With a real threat of interest rate rises and the Government being quite vocal while introducing measures aimed at slowing the rate of growth through a variety of capital management policies, there is a possibility the grounded notion of Yīn (often symbolized by water and earth) can be restored before the Yáng (fire and wind) forces and bursts a bubble that many investors may not recover from.

Investing is all about boundaries and understanding the risk parameters around this.

Once logic and reason go out the window – often the case during the latter stage of many bull markets – then it’s a very slippery slope for markets indeed.