Stock market volatility has become yesterday's news
'Stocks dive on concerns over surging oil, inflation'
SCMP headline, June 11
Let me tell you something about the way this newspaper works. Late every afternoon there is a news conference at which the most important question is what will go on the front page the next day and how big it will be played.
All the departments send someone to attend and, if the business section has an attention-grabbing story, it can happen that this will be taken for the front page and the business editors will have to scramble for something else to put on the front page of this section.
I normally write my column in haunts such as the Foreign Correspondents' Club, but I happened to drop by the newsroom on Tuesday afternoon. I do this occasionally to make sure the receptionist doesn't immediately kick me out, call security or ask me to wear a visitor badge.
The first thing I did was look for the busiest person on the business desk, the one who invariably wears a look that says he or she wants to throw a phone book at a junior reporter. There is always someone who looks that way, the one who has no time for me and whom I therefore choose to plague.
'Hello, what's in tomorrow's paper then?'
'Oh, it's you again? Well, you ought to know. Market's off more than a thousand points but they'll probably take that from us for the front page and we may have to look for something else.'
But when I picked up the paper yesterday morning, it wasn't on the front page although the big news conference had decided that something or other about sales of a mobile phone made by Apple did deserve front-page treatment.
Hello, does this tell me something?
The first thing it might tell me is the Hang Seng Index decline of 1,026.66 points on Tuesday represented a 4.21 per cent drop, which is hardly a rare event when the market has made daily moves greater than this on 10 occasions already this year.
There may be more to take account of here, however.
Look at the chart of the relationship over the past 10 months between Hang Seng Index movements and turnover on our stock market. Turnover boomed with the big rally in September and October last year, which took the market to its record closing peak on October 30.
But in the last 5,000-point rally, which started in late March, peaked at the beginning of May and is now fading away, the punters were not much interested. Turnover continued to drop. The number of true believers is dwindling.
Perhaps that news conference on Tuesday sensed that the readers' sentiments about the stock market are changing.
Where it used to be 'Tell me, tell me, tell me!' it's now 'I'm out and I don't care any more' or 'I'm still in and I don't want to be in and I don't want to be told either. It hurts.'
But if our report yesterday was correct in saying that the extent of the decline caught most observers by surprise, then I think these observers cannot have been observing for long.
I am of the view that this market wants to go down now. Its peak is now almost eight months behind us and the bulls are clearly getting hugely tired of trying to talk it up again.
When a market is pushed the way it wants to go anyway, it can do so very quickly. This should be no surprise.
And there are good reasons why it should want to go down. It is unlikely that share prices have yet taken full account of the true cost of the soaring price of oil, of how much a recession in the United States could affect mainland exports, of persistently rising inflation, and of the prospects that interest rates are now more likely to go up than down.
In short, it is my view that the Hang Seng Index is likely to drop to 16,000 points before it establishes the ground for another sustained bull market that takes it to a new high at above 32,000, and there will be a number of big daily declines along the way down to 16,000.
But then I would say that. I sold out entirely late last summer and I'm just looking for an occasion to get back in.