With tariffs and trade war on trader’s lips once again, we note the Chinese markets have put in a rather nice bounce over past 48 hours. A few days ago we wrote:

The CSI 300 Index sold off again as the US-China trade war is to get much worse. The index is trading right at the huge 3200 level.

The market held and has bounced since then. We also wrote about one positive development, or at least less crazy, namely the China margin debt. We outlined:

Despite the Chinese markets being a real dog, there is one aspect that is actually less crazy than during the prior boom/bust move, margin trading.

At least the officially reported margin trading figures (shadow banking we can’t really know too much about) are more normal than during the 2015 exuberance.

Trading on margin was spurring the extreme speculation a few years back. Since then the Chinese market has become less and less interesting for bullish speculators.

Less interest for the Chinese market has led to less margin debt. People simply don’t find the Chinese market overly exciting these days, despite all the trade war talks.

More sanity among investors could actually lead to a more profound bottoming out process for the Chinese market. The negative trend is still intact, but do keep an eye out for the 50 day average as well as the negative trend.

Maybe the pessimism is so high surrounding China and people have given up margin trading (at least dramatically decreased it) leading to index possibly breaking above the downtrend and putting in a bullish move higher that nobody expects?

Source: Bloomberg