Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

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

6 Critical Money Making Rules