July 2013 (Chinavestor) We argued that high risk had yielded high return in 2013 so far in our last Newsletter, but that is about to change in our view. We are uncertain about the speed of change but the underlying force, e.g. the abundance of easy money, is about to change.
Before examining what we expect going forward, let’s just take a look at the record for June. The Dow Jones Industrial Average (INDEXDJX:.DJI) gave back -1.4% in the month but is still 13.8% up year-to-date (YTD). That is the best first six month performance for the index since 1999!
But Chinese equities and indexes failed to take advantage of such a rally. The Shanghai Composite Index (SHA:000001), measuring the performance of domestic Chinese equities, tumbled -14.0% in June and is down -12.8% YTD.
The Hang Seng Index (INDEXHANGSENG:.HSI), the index of the most liquid blue chips in Hong Kong, fell –7.1% in June and is off –8.2% YTD.