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The Shanghai stock exchange has been in a bear market for the past three years. Since peaking in August of 2009, the index has dropped 42%. But this trend may be coming to an end.

There’s no question a lot of the bad news has already been priced into the market. In terms of P/E ratio, Chinese stocks are trading at the same level they were trading in 2008, after the stock market crash.

It’s obvious the Chinese economy is going through a significant slowdown. But Chinese authorities have started to take actions to promote more growth.

This past Tuesday, during the World Economic Forum that’s underway in China, Premier Wen Jiabao mentioned China won’t have a problem meeting its growth target. Here’s what he said:

“Be it monetary or fiscal, we still have ample strength. The government has 100 billion yuan ($16 billion) in a fiscal stabilization fund and we will appropriately use that for preemptive policy and fine-tuning to propel stable economic growth.”

New loan data supports the idea the government is already taking measures to rekindle growth. New local-currency lending was 703.9 billion yuan ($111 billion) last month, the highest of any August on record.

The Chinese Stock Market Has Been in a Bear Market

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Keep an eye on the downtrend line in the Shanghai Index. A violation of the downtrend line will serve as an indication the trend is changing from a bear to a bull market. And make sure you add some Chinese stocks to your shopping list.

Regards,


Evaldo Albuquerque
Senior Analyst

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