Photographer: Justin Chin/Bloomberg

China H Shares Are Testing History With Wildest Swings Since '07

What goes up, often comes crashing down.

That’s been the state of play for Chinese stocks trading in Hong Kong since the 1990s, and if history is any guide, this year’s 17 percent rally in the Hang Seng China Enterprises Index should ring a few alarm bells. Dramatic collapses have typically followed melt ups, and the leg lower is usually steeper.

The swings help explain why the H-share gauge trades at such a wide discount to global equities. It’s now the most volatile relative to the MSCI All-Country World Index in 11 years, according to three-month realized data compiled by Bloomberg. The Chinese measure erased a gain of 1.7 percent on Monday to trade 0.3 percent lower.

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