Chinese indices are removed from reality

James Mackintosh

China’s market is broken. Not the way the New York Stock Exchange broke for four hours on Wednesday. It is broken because the indices everyone uses to measure the market are entirely disconnected from what’s actually happening.

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Before it met a violent end last month, China’s stockmarket rally was more than just your run-of-the-mill mania. It was political. Many investors called it a “state bull market”, believing the government was firmly in control, guaranteeing that shares would only go up. Buying stocks “is buying the Chinese dream”, proclaimed a top brokerage. The plunge of nearly one third over the past four weeks has left the dream in tatters http://econ.st/1D1FGQ3