The Chinese stock market, described recently by one analyst as being "on fire", finally showed a few jitters last week.
The Shanghai Composite Index, the country's main stock index, fell 4.06 percent on Tuesday and made continued fluctuations over the next few days, wiping trillions of yuan off the value of shares.
Analysts were speculating whether this was merely profit taking or the end of its extraordinary bull run.
The big global investment story has been the more than doubling of the index over the past 12 months.
Not only Chinese investors have benefited but many from around the world who will have already noticed the impact on their pension and other investments that are exposed to the market through Asian or China-related funds.
Why China's market should have suddenly taken off is something of a paradox. Much of the macro data over the past year has been relentlessly gloomy, particularly headline GDP growth, which hit a sixyear low of 7 percent in the first quarter.
Few have been taken more by surprise by the sudden rise in the market than the Chinese themselves.
The equity market had become something of an open joke among many Chinese looking to invest their money, with its chart resembling that of a failing company or a dying patient. After peaking at 6,124 points in October 2007, it fell to below 2,000 in 2012 and largely flatlined until the middle of last year.
The big question remains why China has had such a bull run when many of the companies listed on the Chinese stock markets are finding their earnings squeezed.
Helen Zhu, head of China equities at global asset manager BlackRock in Hong Kong, believes the runaway market optimism has been a reflection of confidence in the government's determination to reform and rebalance the economy.
"I don't think the market would react like this if the government wasn't putting in fundamental changes that were sustainable and will not be reversed in future," she said.
"If you look at the past three to five years the economy was pretty buoyant, growing at between 7 and 10 percent, and the earnings growth of companies was in double digits as well. Yet until last year the market returns were actually quite muted. I think this was because investors were more worried about the quality rather than the quantity of growth. They thought the government was going to resort all the time to turning the tap on and off on credit growth and not take the fundamental measures it has."
Part of the reason for the growth also has been a change of sentiment among China's investors. While shares slumbered they had been investing in property. But with real estate prices nationwide falling, on average 6 percent over the past year, stocks are back in fashion.
What worries regulators is that Chinese people tend to see the stock market as some form of casino. Small investors make up some 70 percent of share buyers, whereas mature exchanges in Hong Kong, New York and London are heavily dominated by more sober－and certainly more rational－institutions.
There have been reports of some people actually selling second and third apartments just to get a piece of the action. Many private individuals have recently been borrowing money to invest in the market since their gains more than cover their interest repayments.
In March alone, a record 1.14 million A-share trading accounts were opened in one week, whereas for most of the past few years the number opened has ranged from just 100,000 to 200,000. There have been a number of similar big spikes this year.
Manic behavior
Frank Tian, investment manager at Aberdeen International Fund Managers, based in Hong Kong, said there is a risk the manic behavior will bring unnecessary volatility.
"There is a gambling culture in China and I say that as a Chinese. Whereas in developed markets you have got longterm professional investors, in China you have young people and even moms and pops gambling their retirement money. It is all deeply embedded in the culture."
Zhu Ning, deputy director of the Shanghai Advanced Institute of Finance, thinks many Chinese investors have little idea about what they are doing.
"I have done a lot of work on behavioral aspects of finance, and it is quite clear that a lot of Chinese investors aren't familiar with concepts of investment," he said.
"Many of them are often very young and know very little about the stock market. They pay very little attention to fundamentals but just how well the market is doing, and they just want a piece of the action."
All this prompted the authorities to try to damp down speculation. The China Securities Regulatory Commission, which regulates the stock market, moved on April 17 to prohibit margin trading within so-called umbrella trusts, through which investors can borrow money to invest in shares.
