Amid people’s extreme disappointments on the Chinese stock market when the Chinese stock market reached bottom low of 1859 points in June 2013, the article commented “Influenced by various unfavorable economic factors, The market has lost its downward momentum in falling prices. The future bull market may not be in the distant future, but rather, it may not be far away at all.”

In reality, the Chinese stock market has gradually grown strong since then.

Recently, successive bizarre events occurred in China's financial markets. The first bizarre event was that in June, the overnight inter-bank loans rate spiked up to an astonishing 30% within a short period of time, causing the stock market to plunge. On August 16, an error operation at Everbright Securities surged the Shanghai Composite Index over 100 points, pushing the index from 2,074 points to 2,198.85 points, a 5% increase. Shares of RMB8.7 billion were traded in just two minutes and a large number of weighted stocks instantly surged on the trading board. Immediately, all sorts of rumors appeared across the Internet, WeChats and Microblogs.

A review by China Securities Regulatory Commission (CSRC) reports; "No manual operational error was found in the review. However, obvious defects exist and there are many management problems in the company’s information system." Although the Everbright Securities incident was an information system error, the system was developed by people and was required to be thoroughly tested before being put into operation. So, why wasn’t such a major defect discovered? And why did the normal risk control system fail? Whether the system failure was caused by an unintentional error or an intentional attack, people play the ultimate role. Ultimately, system errors are caused by people and system attacks are initiated by people. Just as the surge in the overnight inter-bank loan rate does not represent normal trading behavior.

In early 2012, the article “Wipe Away Your Tears and Blood to Embrace the Bull Market” predicted that various unfavorable economic factors would emerge over the 2012-2013 period that together would transform China’s previous bear market into a new bull market round. When various negative factors become reality, people will hear scary ghost stories about the impending market. Today however, the situation has evolved far beyond just the mere telling of those ghost stories.

Under the current situation of slowing growth in China's real economy, it is a priority to curb excessive speculation in the real estate sector and to restore the stock market’s refinancing function in order to promote the healthy development of China's economy. Expanding China’s housing bubble and increasing panic in China's stock market are quite unfavorable for China’s economy. Sadly, what’s happening now is exactly what we don't want to see.

The late period of any bear market is accompanied with great panic, just like the late period of any bull market is accompanied with irrational optimism and overconfidence. In spite of the error operation at Everbright Securities, the stock index did not respond with a dramatic drop in value. Similarly, when the overnight inter-bank loan rate was surging in June, although the stock market slumped, many individual stocks didn't fall to new record lows.

In fact, the stock market’s energy is gradually recovering behind the scenes. For instance, the Growth Enterprise Market (GEM) has continuously hit new highs and various theme stocks are increasingly active. From smart phone accessories stocks to energy conservation and environmental protection, e-finance, Broadband China, then to communications software are all widely speculated. The increasing activity in small-scale theme stocks shows that capital is looking for opportunities other than Bank’s wealth management products and housing market. Just as we discussed above, after everything else has been speculated, China’s stock market will become one of few markets with depressed value.

Influenced by various economic factors, the market has lost its downward momentum in falling prices. Indeed, as illustrated by market responses to the error operation at Everbright Securities, the opportunities for short sells in the market are decreasing and their powers are evaporating. As people begin to worry or even go into a panic, we will be wise to reflect on the old saying: “When the coldest winter comes, spring won't be very far away.” Thus, the bull market that was predicted may not be in the distant future, but rather, may not be far away at all.