China Stock Rally Was Filled With Duds

Only a third of Shanghai Composite Index stocks had positive returns in the 12 months before recent high

It was a decent stretch for Chinese stocks before the Shanghai Composite Index’s peak on Jan. 24, that is unless investors looked at where the gains were coming from. Or more importantly, where they weren't. In the 12 months prior to the benchmark’s recent high, only a third of onshore Chinese stocks rose. Excluding those that listed in 2017 and this year, four out of five dropped. The lack of breadth meant that when sentiment turned, the market’s source of upward momentum disappeared as everyone rushed to exit the same stocks at once.

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