The Chinese stock markets have been closed for several days to celebrate the new year–the year of the Rat. One wonders what the Chinese market will do when they reopen. During the last three days the less volatile Japanese stock market lost 6% while the Dow lost 3%. Of course the Chinese themselves during this time have experienced the worst storms in the last 50 years with many areas out of power, while others managed to celebrate the new year while listening to reports of a possible recession in the US. After experiencing a 500% gain since 2006, the Shanghai stock market has already broken below its 200 day moving average.
We live in interesting times.
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Interesting and hopefully quickly disintegrating! I still have hope that Ron Paul will be elected President which means that the inevitable worldwide collapse of the monetary system needs to be obvious to all. Then Ron Paul will be sought after for his depth of knowledge.
Shanghai opens on Wednesday so the next two days in world markets will also impact the Chinese markets. I would say that the current outlook for the election is helping to key the bear market and possibly a collapse in stock markets. I think the presence of Ron Paul in the campaign was helping to maintain the markets and his marginalization by the MSM and the resulting choices are undermining the markets. John McCain? One party rule? Tax rebate checks from a government that is going to double its borrowing this year? That doesn’t sound good to me as an investor.
The Chinese market is down 25% from its highs and almost 15% since the beginning of the year. Sounds like a CNBC buying opportunity!
Dr. Thornton,
If you’re Chinese, buy like crazy. If you’re not Chinese, nor one of the select few foreigners who are allowed to invest in the stock market in China, you’re out of luck.
Mainly for that reason, I wouldn’t expect the world markets to impact the Chinese stock exchange too much either. The Chinese stock market reacts mostly to domestic events (policy actions, for the greater part) and is largely insulated from external incentives (it’s easier for the contrary to happen, like it did exactly one year ago). Shanghai and Shenzhen look more like a freaky casino (where there house loses, a lot) than a real stock market. And the govt. makes sure that keeps on. So it’s really of little use comparing it to Tokyo, for instance.
OK Dani. I guess its just different this time.
BTW: Hong Kong and India are down 4% this morning.
Dani,
Are you decoupled, or what?
Dr. Thornton,
Why would that be? (No sarcasm, real question)
Jake,
LOL. I’m taking the pun seriously though, and adding an important qualification to what I said before. I don’t subscribe to the decoupling thesis. I do believe that China will suffer gravely from the American recession to come (and depression, if
the govt. keeps trying to “stimulate” the economy).
A sharp decline in American consumption will affect directly and indirectly Chinese exports (one of the drivers of economic growth) of capital and consumer goods and Fixed Assed Investment (THE great driver of growth in China), be it because of the shifts in expectations about the returns on investments (which are tightly connected to China’s role as an exporter) be it because of a credit crunch. China will face higher inflation, which is already becoming a problem, decrease in nominal wages and such.
But I believe that the amount of suffering will depend on a great part on the Chinese response to the first impacts – will they try to stimulate the economy too, pumping money, burning FX reserves (mostly held in dollars) and savings to keep the investment growth pace?
No, China has not decoupled (and neither have I) in any meaningful sense of the word. It is far less dependent on the US than it used to be though.
What I was arguing before was that the stock market is so hampered in China, so buffered against the risky maneuvers that normally characterize a real stock market – and, despite the trade volume, is only now starting to have a real significance to the economy – that there is a big chance that the markets will not react like other major markets. We have seen effects of the credit crisis on the Shanghai stock exchange, like when ICBC and CCB announced that they were exposed. But that effect is likely to be very limited, much more so than the effects of the current energy/transport crisis going on.
Sorry for the long comment.
Cheers.
This does not compare with the crisis that is happening now
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