This week's sell-off in global equities started in the mainland but as Asian stock prices slid further yesterday, the only big market unaffected by the continued slump was the mainland itself.
That should not be surprising. Events this week have shown swings in the mainland's A-share prices can have a powerful influence on investor sentiment towards markets elsewhere in the world. But the mainland's stock exchanges remain driven by domestic, not international, forces.
Despite enormous strides in recent years at improving standards among local brokers, strengthening institutional investors' role and inducing better-quality firms to list, the mainland's onshore markets remain predominantly speculative.
Price movements are driven by millions of small investors in search of fast returns. They dip into the market on rumours and are quick to take profits should the whispers turn bearish. But if the market falls significantly, they are just as eager to seize the opportunity to jump back in again.
This is pretty much what happened yesterday. Following Tuesday's 9.24 per cent slide in the Shanghai and Shenzhen 300 A-share Index, money swept back into the market and the index bounced back by 3.54 per cent.
Despite Premier Wen Jiabao's pledge yesterday to safeguard the stability of the country's financial markets, such volatile swings are likely to remain a factor of life for mainland investors for the foreseeable future.
