Rational or not, this is how Chinese dragon rises

China's benchmark equity index rose to new post crisis high, however was down -0.47% in the closing. Neither weak economic data, nor global risk aversion is succeeding to break the bulls or rather say Chinese Dragon.

It is clear buying pressure from the domestic market is pushing shares up, however it IS not very clear, what might driving the bulls fundamentally speaking.

Many market participants and analyst including us has called the rally to be very much speculative. As of now, few might have any idea, where this rally might actually end.

Key fundamental highlights from China -

• Economic outlook remains gloomy, with latest HSBC PMI yesterday printing 49.2, lowest level at least in a year. GDP hit lowest level since crisis at 7%.

However some positive developments are on the horizon.

• China set up Asian Infrastructure Investment Bank (AIIB), which is expected to be supportive of Chinese economy, if successful.
  
  
• It will provide a clear boost to Chinese economy via Yuan, should IMF decides to include Yuan in SDR currency basket this year.

Speculation and volatility remains rampant.

• Last week, Chinese brokers opened new 3.2 million A shares account, highest on record.
  
  
• 5 day average of weekly and daily realized volatility stands at 4% and 1.7%.

Historically speaking rise in Chinese stocks, has been similar to recent move. As seen in the chart from John Kicklighter, eminent analyst at dailyfx shows Shanghai composite during 2008 crisis rose almost 500% in a span of 2.5 years.