80% Chance China Will Rally… Before Final Crash, Says Pettis

Even after crashing last week, the Shenzhen Index has returned an amazing 87% over the last year. The big question is whether the market finds a floor (with lots of government assistance) or just keeps sliding toward some level where fundamentals matter, wherever that might be. Michael Pettis, professor at Peking University’s Guanghua School of Management, offers his self-described copout prediction.

“The Chinese stock markets probably have at least one more good rally in them before they come crashing down, but I wouldn’t bet the farm. I would especially distrust owning shares in the big banks,” he writes.

Two factors that made a Chinese crash likely

Although Pettis hadn’t predicted...