From Asia Sentinel:
The current bull market in China shares looks like a lot like any other bull market: frenzied trading volumes, fresh record highs on a regular basis, cheerleading banks upgrading their “price targets”.
But there is also a very special rationale involved in the run on China assets. This is not just a bull market this is a fight that could be called “China versus the Speculators.”
Speculators often “go after” a market when they see a weak spot in macro-economic policies. George Soros went after the British pound in the early 1990s, with famous success, because he calculated that the pound was overpriced within the European Exchange Rate Mechanism. Speculators attempted to run down the Hong Kong dollar peg in 1998 both because they thought the currency was overpriced, but also because they detected a technical error in the way the peg was managed.
Speculators are now going after China. This time around they are betting that the currency is undervalued. This is interesting because at one level, the foreigners investing in China are showing they have faith in the country’s future. [Full Text]
