Look at a 5 year chart. The SSE was simply over-bought. Any trader would tell you that.
Now why was it over-bought? Part of the reason is because of the Shanghai-Hong Kong market link, which drove massive amounts of volume into Shanghai, and traders took advantage by taking on large margin accounts. When the savvy traders started booking profits, the rest were left to try cover their positions.
The Hang-Seng (Hong Kong) dropped too, but by far less because it was priced much better.
Anyhow, this has nothing to do with the Chinese economy, or even stock fundamentals. It's just that equity prices were driven up too high by traders.
The Chinese economy isn't doing that great right now, so people were puzzling over the stock market boom. But as you say, these two things are almost completely separated at this point.
Now if someone could tell me where to park my RMB savings...real estate? Stock market? Under my mattress? The real problem is that investment opportunities in China really aren't that great.
Easy opportunities aren't. By easy: click a switch and send money somewhere.
But financing is huge. A lot of people and businesses don't have sufficient access to a functioning banking system or capital markets. Invest in small businesses / people you know. You're in Beijing - move out to the places that aspire to be more like a developed city, and just rinse and repeat.
I have a job in Beijing and frankly like it; I'm not an investor or a business guy, I'm just a programmer/researcher/geek who is living the life he wants to. If I was in the states, I would just throw my money in safe investments and buy a house; here all of that is impossible (well, you can do things with the banks, but kind of dodgy). My best bet is just to transfer money back home and play the American stock and real estate markets like my Chinese friends are already doing :p
Business and investment in China is absolutely crazy: your partners are more likely to screw you over than not, and in order to win you have to be constantly on your toes. When public construction SOEs are rebranding as internet companies, you can bet the smaller hole in the walls are doing the same!
Every third-tier city wants to be like Beijing. For example, my wife's hometown in Hunan (Chenzhou) has big aspirations but very little to offer. It is just heart break waiting to happen. Apartments being built everywhere shoddily without central heating...who wants to live in those?
China is especially bad. At least you have decent indexed funds in the states, or you could even buy some real estate that wasn't incredibly bubbly (even at the height of the housing bubble, the US was nowhere near 40% occupancy in a tier one city).
If I ever move back, I'm buying a car and a house...and I'm doing the max contribution on my 401k for as long as possible.
Now why was it over-bought? Part of the reason is because of the Shanghai-Hong Kong market link, which drove massive amounts of volume into Shanghai, and traders took advantage by taking on large margin accounts. When the savvy traders started booking profits, the rest were left to try cover their positions.
The Hang-Seng (Hong Kong) dropped too, but by far less because it was priced much better.
Anyhow, this has nothing to do with the Chinese economy, or even stock fundamentals. It's just that equity prices were driven up too high by traders.
http://finance.yahoo.com/echarts?s=000001.SS+Interactive#{"r...
https://ca.finance.yahoo.com/echarts?s=%5EHSI#symbol=%5EHSI;...