China stocks defy interest rate hike to record high

China's major stock index shrugged off the latest monetary tightening measures on Monday, rising more than two percent to hit an all-time high.

China’s stock market has been booming for more than one year, the index started from around 1500 in Aug 2006 to above 5400 today. More than 3 times in one year! Last Friday the central bank of China announced another 0.27 interest hike, and the index again, picked a lot on the news.

There are a lot of reasons for the booming. China exports a lot which brings big favorable balance. Then US pressed China to improve RMB, and then a lot of more money rushed into China.

But now the buying power comes from the funds, who receive the money from the common people. Are Chinese so rich? No. Usually they invest thounds of RMB which is all they have. But they still do it. Don’t they know the risk of the market? Yes, They do. But they have to.

In China, the assets like apartment is increasing dramatically, more than 10% per month, so the RMB is devaluing in China. The latest price index released is 6.5%. So if the common Chinese don’t put their money into Stock market, their money is decreasing!

That is what is going in China. Everybody knows the price of the market is too high, but everybody is “pushed” into the market.