Shanghai based investment house BNP Partners has advised clients to avoid attempting to “catch a falling knife” after the Shanghai Composite Index, China’s mainland stock market, ignored dovish monetary policy decisions from the People’s Bank of China, plunged 3.3% and entered a technical bear market.

The Shanghai-based investment manager and broker which oversees the deployment of over US$3.5 billion-worth of client funds says it doesn’t see an end to the selling on the immediate horizon. “There may be some technical retracements but until a meaningful increase in liquidity returns to the market, we won’t be looking to get back in just yet,” said Cole Denning, Chief Investment Strategist at BNP Partners.

Since peaking at 5,166.35 on June 12th, the index has plunged 21.5% in response to wave after wave of investor selling. Closing out Monday’s febrile trading session at 4,054.86; a 20% correction from the height of the rally is technically bear market territory.

BNP Partners says the volatility is being blamed largely on a lack of liquidity. China’s central bank’s efforts to help add liquidity revolved around a cut in interest rates and a reduction in so-called RRR – or the reserve ratio requirement which stipulates how much cash commercial banks must hold in reserve when lending.

“Nearly 7 trillion yuan is committed to a slew of IPOs and the move by regulators to rein in excessive levels of margin trading has taken more than a few bricks out of the wall of money that drove the Shanghai Composite up close to 150% in just a year. Until those IPOs work through the system, we’ve taken risk off the table,” concluded Denning.

About BNP Partners:
At BNP Partners, they define effective wealth management as an overall strategy that seamlessly integrates their clients’ personal ROI (return-on-investment) aspirations with our investment management prowess.

Whilst today’s markets can often demonstrate the type of characteristics that have served to hamper the efforts of many traditional investment methodologies to secure the returns they once did, BNP Partners continue to secure exceptional returns for their esteemed clients utilizing a meticulously applied combination of those same traditional methods whilst diligently complementing them with new, pioneering techniques.

Contact BNP Partners:
1/F, Jinzhong Mansion, 98,
Huaihai Middle Rd.,
Shanghai, 200021
Phone: +85258083924
Email: [email protected]
Web: http://www.bnppartners.com