Let us enter the Chinese stocks universe with the knowledge of local benchmarks.
The SSE (Shanghai Stock Exchange) classifies three major indexes. First, the SSE 50 established by the scientific method of representation, then a second, the SS 180, also based on the same concept but on a wider range of securities and a third, weighted by capitalizations, the SSE Composite which currently includes 974 Chinese values.

This index was launched in 1991 on a basis of 100 points. Its real takeoff has taken place during the two years 2006/2007 when investors drove prices to stratospheric levels. This exceptional performance allowed to reach an historical peak in 2007 at 6120 with growth of 6000% in sixteen years. Bubble was ready to explode!

The 2008 financial crisis was the catalyst and the SSE Composite in few months passed from 5260 to 1810 points; valuations lost over 60%. Volatility characterized for a long time the Shanghai Stock Exchange, and seems a return of normal prices as shown by the financial ratios such as average PER just over 12 times of 2012 EPS estimates.
This standardization of financial ratios is accompanied nevertheless of a general revision of earnings per share, China is characterized as the world area which sees the results of its listed companies revised downward most often.

The composition of this index suffers of the hegemony of oil and financial sectors. Indeed, the first capitalization "PetroChina" weights about 10% and despite the expanded number of companies listed in the SSE Composite, the first ten caps (six banks) concentrate 38% of the index.

Technically, the index was confirmed an important support on the 2150 points that allowed it to block the strong downward trend of 2011. The index is now with a consolidation phase close to 2250 points.
A technical rebound is set up thanks to a large inverted "head and shoulders” which could lead prices in the area of 2530 points, then towards 2650 points, where a gap is opened since August 2011.
Validation of this technical pattern need the crossing of 2410, area tested in recent sessions.