Investors pondering why Beijing's weekend interest rate cuts did not trigger a sustained rally for mainland shares yesterday can of course point to the rise in risk aversion sparked by the deepening Greek crisis. More mundanely, it may simply be that after four policy moves since November, the law of diminishing returns is being exerted on A shares. Analysts at Bank of America Merrill Lynch point out that each easing since November has delivered a smaller boost to sentiment than preceding ones. So while few investors doubt that Beijing wants anything other than a stable stock market, they are unwilling to bet that stability alone will encourage new funds to flow into the market. And that is bad news for a bull run built on margin finance. "There is still a small chance in our view that the bottom of the market may fall out in the coming weeks if enough investors conclude that the bull market is over," the Bank of America Merrill Lynch team wrote in a note to clients.
