'Animal spirits' driving stocks

The momentum of continuous rise in China's stock market over the past few months recently suffered a heavy setback.

After reaching a peak of 3,478 on Aug 4 since it launched an accelerated recovery offensive from the lowest level of 1,664 in late Oct, the Shanghai Composite Index rapidly reversed downward. On Aug 19, the benchmark index slid below 2,800, declining 677 points, or a drastic 20 percent drop in only 13 trading days. The index went up this week, but closed at 2,915 yesterday, down 2.59 percent from the previous close. The Shenzhen Component Index closed at 11,688 yesterday, down 3.21 percent.

Stock markets have been likened to an economic barometer. But China's and the world's economy have not undergone the same drastic changes over the past few days as that in the country's capital market. On the contrary, data released indicates that China's real economy so far this year has obviously turned for the better than last year when the worst effect of a global financial crisis took its bite. And, continuing deterioration of some economic factors, if there is any, is the unavoidable after-effect of the crisis.