A 7 Point Comparison of 528 to 530, Or Why 528 Isn't Like 530, So BTFD

iFeng: 全面剖析6.5%：5·28不是5·30 7大异同点预判后期走势

The 7 point comparison of May 30, 2007 6.5% one day drop to May 28, 2015 6.5% one day drop. In some cases I've pulled a Google Translate or summarized it.

1.

The volume in 530 was very high and represented a high rate of volume. The volume on 528 was high, but not excessive. There were 500 stocks limit down on 528, 18% of the total. On 530, 800 stocks were limit down, 60% of listed shares at the time.

This point makes me think the market could slide for longer this time.

2.

In 2007, January 4 to May 29, the stock index rose 62.02%, in 2015, January 4 to May 27, the main stock index rose 52.77%...in 2007 the trend is even more crazy.

This is correct, but they should have gone back to July instead of January. On 530, the market was trading 400% above July 2006 levels. On 528, the market was only up about 125%.

3.

Regulation is much lighter this time. On May 11 and May 23, 2007, the government twice issued warnings of "caveat emptor" to market participants. When the message wasn't heeded, the stamp duty was raised.

This ties in to number 2, the government isn't as concerned here and is more worried about managing a long-term bull market than it is concerned a major top could be unfolding.

4.

Valuation: as of yesterday's close, the Shenzhen market has an overall average price-earnings ratio of 60.59. The Shenzhen main board P/E is 37.38, small cap P/E is 75.21, the GEM P/E reached 129.86; the entire Shanghai stock market average price-earnings ratio is only 21.97. On 520, the Shanghai stock market average price-earnings ratio was more than 40; Shenzhen average price-earnings ratio was about 60, at the peak of 6124 points, the Shanghai stock market average price-earnings ratio rose to 69, then CITIC Securities had a P/E of 48, HaiTong Securities had a P/E of 39.34.

The lower P/E is in large part due to low bank valuations. Large blue chips have generally not been the center of speculation to this point.

5.

In 2007, the stamp tax was raised from 1% to 3%. On 528, the main news was Huijin selling bank shares, but this is a small amount.

This explains the 520 crash much better than the 528 crash, if you don't think both cases are mainly a result of psychology to begin with.

6.

Guangzhou Great Power Energy &Technology (300438) was limit up and limit down on Thursday, a swing of 20%, and there were many small companies with 20% moves. 520 saw similar volatility in small caps.

7.

This market is leverage fueled. The 2007 market was fueled by new investors coming into the market. Investors put about 100 billion yuan of new money into the market during the run-up to 530. Investors have run margin debt to over 2 trillion yuan in this bull market. Risk is greater in 2015.

The current market is much riskier than the 2007 market in terms of volatility, due to the high level of margin debt.

Article conclusion: BTFD.

Law of history show: rebound is a high probability event