An epic train wreck?

The mere thought of an epic trainwreck in China’s markets has sent bullish investors spiralling, stuck in the latest chapter of boom-to-bust mayhem. You didn’t need a PhD in quant analysis to see this one coming—when the market’s expectations were set sky-high for a 2-3 trillion yuan stimulus package and instead got hit with a big, fat zero, the party was over before it even began.

If Chinese stocks were the real-time pulse check on the Party’s determination to revive the sputtering economy, then the barometer is flashing a stark message: sentiment has plunged from euphoria to utter carnage. Let’s call it what it is—an abject failure—as Chinese shares opened sharply lower, sending a clear signal that the market is no longer buying the half-hearted promises. The hopes of a major stimulus-driven rally are wheezing, leaving investors scrambling to reassess their China play.

After rallying 30-40% on nothing but stimulus dreams, Chinese equities crashed hard when yesterday’s event offered little more than tired assurances and empty promises. The market was primed for fireworks but instead got a damp sparkler. This could very well torpedo the mega-rally the retail crowd in China was betting their chips on.

China desperately needs a hefty helicopter money drop or some turbocharged special bond issuance to ignite demand-side stimulus. But instead? We got the same recycled handouts announced last month. Zheng’s speech? Far from the “whatever it takes” moment, the market had been drooling over. Without that bold move, the entire rally looks ready to fall apart.

And now, the writing is starting to appear on the wall: instead of the great reopening catch-up, we’re facing the great unwind. For investors still clinging to their China play, this kind of rug-pull can send shockwaves through Asian markets. And if the unwind is here, the ride down will be as wild as the ride up.