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

BOCOM International's Hong Hao says the Shanghai Composite needs to fall 30% to reach fair value.

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....

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