By Dhaval Joshi, chief strategist at BCA Research
Absent the multi-decade housing and construction boom, China will be unable to generate the monster credit impulses that it did through 2000-20.
Hence, the recent melt-up in Chinese stocks and China plays may last a few weeks more but is unlikely to be a rerun of the 2015 episode either in magnitude or in duration.
Close the tactical overweight in global materials (MXI) at its time limit on October 3, and long copper versus gold at its time limit on October 12.
When a positive market catalyst meets a deeply oversold market, you get a market melt-up. That in a nutshell explains the recent sugar rush in Chinese stocks and China plays. The positive catalyst was the unveiling of a new stimulus cycle. And the collapsed complexity of the preceding price downtrend screamed that China plays were ripe for a melt-up (Chart 1).
