The time is 1:20 to 2:20 p.m., and its losses stand out in a rally that added 545 points, or 15 percent, to the Shanghai Composite Index over the past 30 days.
In that hour alone, the equity gauge dropped 359 points. It fell in 19 of 30 sessions, the most consistent declines among rolling one-hour periods when the Shanghai bourse was open for trading.
So what’s behind the losses? Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong, says large Chinese institutions are probably choosing that time to place sell orders as they gradually re-balance portfolios to accommodate a 109 percent surge in Shanghai shares over the past year.
A competing theory comes from William Wong, a director at Chinese brokerage Shenwan Hongyuan Group Co. He says overseas investors may be reducing their positions, with orders getting executed late in the Shanghai day as European money managers start to wake up.
Of course, patterns like these tend to eventually self-correct as more investors catch on.
“Definitely people are looking at it,” said Brett McGonegal, executive managing director at Reorient Group Ltd., a Hong Kong-based advisory firm. “Once the needle moves, you have a lot more that goes behind it. Computers pick it up very quickly.”
The declines may lure traders of index futures, contracts that make it easy to place leveraged bets on intraday swings, according to Bocom’s Hong. In China’s cash equities market, where the Shanghai Composite rose 3 percent on Monday, investors aren’t allowed to trade the same shares more than once in a single day.
Whatever the trend’s staying power, it’s yet another example of how volatile Chinese stocks have become as investors grapple over what’s in store for the nation’s longest bull market.
