'Shanghai's bull market rebound won't last'

THE Chinese trade stocks like they buy chic handbags. Well, that's the theory according to BOCOM International's head of research Hong Hao: "The Chinese have a propensity for luxury. If it's expensive, it must be good."

That helps explain why the Shanghai Composite is back in a technical bull market after this summer's spectacular sell-off and why Chinese small-caps listed in Shenzhen are trading at a giddy 100 times earnings.

Mr Hong's not convinced the rally has legs though. He calls the latest exuberance in Shanghai a bear market rally. He's been right before: In September 2014, he forecast the market would rally, before getting it right again in June 2015 when he called time on the bull run. What's more, he thinks the Shanghai Composite needs to plummet as much as 30 per cent to reach fair value.