May 19 (Bloomberg) -- The bear market in Chinese stocks will probably deepen after the nation’s Shanghai Composite Index dropped beneath its low reached in August, according to Bespoke Investment Group LLC.
The measure tumbled 1.9 percent on May 11, stretching its loss from a November high to 21 percent. A bear market is commonly defined as a decline of at least 20 percent from a high. The plunge dragged the Shanghai index beneath a three-month closing low reached Aug. 31, and while the gauge climbed back above that level on May 13, it fell below it again this week, a sign that more losses are likely, according to Bespoke.
China stocks have suffered 25 bear markets since 1990, with drops averaging 35 percent, according to Bespoke, a Harrison, New York-based firm that manages money for wealthy investors and provides research to professionals. That suggests the measure will extend its slump, said Bespoke co-founder Justin Walters.
“The current technicals suggest that there’s more downside in store for China’s bear market in stocks,” Walters wrote in a note dated yesterday.
China’s stocks went through their most recent previous bear market in August, tumbling 23 percent from a 14-month high on Aug. 4 through the end of the month. The index then surged 25 percent through Nov. 23 before tumbling anew on concern the government will keep tightening monetary policy to contain inflation and avert asset bubbles.
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