The four most dangerous words in finance are “this time it’s different”. China’s soaring, $10 trillion stock market has evoked memories of boom and bust in 2006-2008. Many of the same themes are present, while the differences aren’t sufficient to suggest a happier ending.
The current ascent is rapid, but not yet as dizzying as last time. When the CSI 300 Index of leading shares reached its most recent summit on June 8, it had risen almost 150 percent in a year. The benchmark quadrupled in the twelve months before hitting its all-time high in October 2007.
Nevertheless, the latest frenzy has many similar features. Retail investors are again at the vanguard of speculation: they hold almost two-thirds of the free float of listed stocks. Farmers, retirees and industrialists alike have joined the gold rush.
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