The Credit Suisse analysts also believe that Chinese have “recoupled with its long-run association with MSCI China year-on-year performance” after a disconnect in June – earlier in the year, the market showed strong performance momentum but a large number of negative earnings revisions.
Technical indicators, such as the 200-day moving average and relative strength, also show that the market froth may have dissipated. The market experienced a rapid decline from trading at over 20% above 200-day to slightly negative. Additionally, the relative strength index of MSCI China has fallen off from overbought to near oversold levels.
iShares MSCI China ETF
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Max Chen contributed to this article.