WhiteLove
3rd July 2015, 17:59
In August 2013 pro investors started speculating that companies on the Shanghai Stock Exchange is heavily undervalued so they took position. The performance turned out to be very good, which slowly attracted a lot of attention to ordinary non-pro investors who thought it was easy money and wanted to profit from this stock market strength. They entered the markets in mid April 2015, some of them got good returns so they did not sell. In early June 2015 pretty much all non-pro investors were hooked and entered the markets, at this point most of them had not collected any profits. Those who then entered the market thought it was super safe and so when the markets started declining more and more, the panic started increasing. All of the non-pro investors that entered the markets in mid April started losing some of their profits but were waiting, while the pro-investors started selling heavily based on the speculation that the bull market is over. This caused even more panic among those that had entered late, so they started collecting losses which in turn made all of those that entered in mid April worried when their gains now turned into red figures, then they started selling too. Now an enormous sell pressure took place when very few wanted to enter the markets and almost all wanted to exit. At this point most of the non-pro investors collected losses on their positions.
This is a typical bubble scenario - a slow long term force of attraction, heavy trading with index gains of +17% in 30 days, then everybody want to exit at the same time but most of the ones entering late exit later than all the rest while everybody that had gains waited too until they started losing also, all of this while the pros were hitting the sell button like crazy to get as much money out of there as soon as possible.
This is a typical bubble scenario - a slow long term force of attraction, heavy trading with index gains of +17% in 30 days, then everybody want to exit at the same time but most of the ones entering late exit later than all the rest while everybody that had gains waited too until they started losing also, all of this while the pros were hitting the sell button like crazy to get as much money out of there as soon as possible.