Bubbles

The Chinese stock markets are currently in a bubble as can be seen from this chart of the Shanghai B Share Index:

Source: Bloomberg

The B share index is up a mind-boggling 108% year-to-date. This is even worse than the Nasdaq bubble of the late 90's in terms of magnitude.

This is what happens when bubbles pop:

Source: Bloomberg

This is a chart of the main Saudi Arabian stock market which went through its own bubble less than 2 years ago. As you can see, at one point the index was up over 160% in a little over a year and then crashed and is now down 64.2% from its peak.

Bubbles get popped and one can expect the same result from the Chinese stock market in due time.