Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
The Inflation Mega-trend and UK House Prices - Housing Market Analysis Trend Forecast 2022 to 2025 - 5th July 22
Gold Price Summer Seasonal Doldrums - 5th July 22
Tame Budgies Having Fun on a Grape Vine - UK Parakeet Easy Training - 5th July 22
Is the US Yield Curve Inversion Broken? - 3rd July 22
New Signs Economic Turmoil Will Prompt Fed to Lose Its Nerve - 3rd July 22
Stagflation With Powell Could Make Gold Price Happy - 3rd July 22
UK Housing Market Analysis, Trend Forecast 2022 to 2025 - Part 2 - 30th June 22
Stock Market Turning the Screws - 30th June 22
How to Ignore Stocks (and why you should) - 30th June 22
Top Tips For Getting The Correct Insurance Option For Your Needs - 30th June 22
Central Banks Plan To Buy More Gold In 2022 - 30th June 22
AI Tech Stock PORTFOLIO NAME OF THE GAME - 29th June 22
Rebounding Crude Oil Gets Far Away from the Bearish Side - 29th June 22
UK House Prices - Lets Get Jiggy With UK INTEREST RATES - 28th June 22
GOLD STOCKS ARE WORSE THAN GOLD - 28th June 22
This “Bizarre” Chart is Wrecking the Stock Market - 28th June 22
Recession Question Answered - 28th June 22
Technical Analysis: Why You Should Expect a Popularity Surge - 28th June 22
Have US Bonds Bottomed? - 27th June 22
Gold Junior Miners: A Bearish Push Is Coming to Move Them Lower - 27th June 22
Stock Market Watching Out - 27th June 22
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China Stock Market Crash, A Buying Opportunity?

Stock-Markets / Chinese Stock Market Jul 01, 2007 - 11:51 AM GMT

By: Nadeem_Walayat

Stock-Markets

Millions of chinese small investors have been flooding into the chinese stock market during the last 6 months in ever increasing numbers, as is normally the case they are likely to be the last to enter before the chinese market enters a short but swift bear market.

Over the last 12 months the market has risen from 1512 to a high of 4335, a near tripling in the index. The rise has been fed by speculative fever gripping chinease retail investors, with new recruits to the 'bubble' at the rate of 300,000 per day.


China Stock Market Crash, a Buying Opportunity?
Chart courtesy of stockcharts.com

Technically, the above chart shows -

a. The parabolic up move to the peak in May 07 at 4335.

b. The subsquent second lower top at 4312

c. The wide measuring move between the two peaks of 765.

d. The support zone between 3050 and 2600.

e. The MACD indicator is in a critical overbought state, also a MACD cross has occurred which confirms the downtrend.

The market has been bid up to an expensive state and currently trades on a PE ratio of 45. This is especially apparent when compared with other fast growth markets such as India on a PE of 22 and South Korea on 20. Which highlights the extreme overbought state of the chinese stock market.

Conclusion : The Shanghai Index is targeting a downtrend to between 3000 and 2600. Given the rapid rise to 4335 this is likely to be over a short period of time, possibly to be completed by Sept 07. The fall from the 4335 would represent at least a drop of 33% in the chinease index.

Even though many chinease investors will be hurt to some degree by the fall and there will be some limited impact on the chinease economy. The decline will still represent an good long-term buying opportunity given that China's growth rate is currently running at 10%, even if it takes the market some time to build a base before resuming the bull market. This bull market has many years if not decades further to run so there is plenty of time for short-term overbought states to work themselves out for long-term investors.

There will be some fallout in other stock markets, but it seems that the financial markets have learned from the February falls to 'expect' a downturn in the China given the relatively expensive pricing of China's shares. Therefore the sell offs in other markets are likely to be relatively muted in comparison, especially in markets that are in a technically much better shape, such as Japan.

By Nadeem Walayat
(c) Marketoracle.co.uk 2005-07. All rights reserved.

The Market Oracle is a FREE Daily Financial Markets Forecasting & Analysis online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

christian
01 Jul 07, 14:01
Effects on chinese consumers/workers

The chineese economy has been rising in conjunction with the growing markets and with the growing export surplus.

The market will hurt the economy and consumer spending down in the united states will hurt there export surplus, a bit but they do have emerging markets to sell to, but these markets will likely be impacted by the domino effect of the chinese market taking the DOW down along with derivatives repricing, and then emerging markets will be hit .

America says it has to narrow the trade deficit, but no one seems to be saying there are obviously two ways to do this, and that the only one that makes sense is to keep imports high (cause we need consumer spending to stay strong so other country's can finance us) and INCREASE american exports to cut trade deficit. the deficit may be rising but the ratio of exports to imports in trade with china is rising. i.e we have 20 exports and 50 imports now which is a deficit of 30 but next year we may have 30 exports and 55 imports so while the deficit may grow the % of exorts to imports increaes from .40 to .56


Post Comment

Only logged in users are allowed to post comments. Register/ Log in