China's stock market got wrecked on Friday with the Shanghai Composite index crashing by 7.4%.
The red-hot market is now down 19% from its high, which it set on June 12.
Some folks may see this as a buying opportunity, but not the analysts at Morgan Stanley.
"[T]his is probably not a dip to buy," Morgan Stanley's Jonathan Garner said. "In fact, we think the balance of probabilities is that the top for the cycle of Shanghai, Shenzhen and Chinext has now taken place."
With the housing market stagnating, savings products offering no returns, and restrictions preventing investments overseas, China's investor class have poured their money into the domestic stock market. The number of new brokerage accounts boomed and the amount of margin debt borrowed to buy stocks surged. Even after Friday's crash, the Shanghai Composite is up 104% from a year ago.
Chinese stocks are expected to fall another 30%, that mean about 50% off the highs, a typical market crash.
The rest of the world will follow suit. Us equities should be at recession lows within a year from now. Thats when I would buy futures contracts.
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