Top investors want companies to prioritize the strengthening of balance sheets over increasing capital spending and share buybacks. The share buyback phenomenon, which has increased in several top companies over the course of this year, has been a contributory factor in the momentum seen in leading stocks/sectors. Whether company management heeds this, of course, remains to be seen. If a course correction were to happen, a further deepening of the bear market can be expected.

As highlighted in a past article, infrastructure spending is a key component of the Chinese economy, despite the growing number of ghost cities and infrastructure facilities. Due to events over the past couple of months, a crash in China’s real estate sector has emerged as the most likely factor for a „credit event“, i.e. a debt crisis which could accelerate a market crash.