Is the Surge in Chinese Stocks All But Over?

MSCI China has outperformed the developed market stock index (the MSCI World Index) by about 11% since the middle of March. Over that period the percent of stocks outperforming the World Index increased from a paltry 14% to an elevated 79% (blue line in the chart below). In the past, when the percent of stocks in the MSCI China outperforming the MSCI World Index reached around 80% the relative outperformance was all but over and a new downtrend resumed. We are careful not to call for a renewed downtrend in Chinese stocks, but perhaps they are ready for a breather.