Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China’s Economy and Stock Market Leading Us Again… Downward

Stock-Markets / Chinese Stock Market Feb 03, 2010 - 01:49 AM GMT

By: Graham_Summers

Stock-Markets

Best Financial Markets Analysis ArticleMuch of the talk of economic recovery has hinged on China’s growth “miracle.” Indeed, while the rest of the world slipped into recession or worse, China has somehow managed to produce GDP growth of 8%, a staggering figure when you consider that roughly 40% of the Chinese economy hinges on exports… and the rest of the world is undergoing a massive state of deleveraging (and purchasing less).


I know, I know, the People’s Republic is shifting to a more “internal consumption” based economy. But with the average Chinese income hovering around $3K per year (roughly $8 per day not counting weekends), I’m not sure how the Chinese are going to start chugging Lattes and buying Tiffany’s jewelry in the next year or so.

Let’s step back and consider the facts pertaining to China today. China:

  1. Is a Government-controlled country
  2. Economic accounting oversight does not exist within this country
  3. The Government has spent nearly $600 billion (almost 15% of GDP) in Stimulus
  4. As a state-owned country, when the Government says “LEND!” the banks lend, big time. Consequently…
  5. Most of the Stimulus has plowed into the real estate markets (new apartments in Shanghai and Beijing have risen 50-60% in value in the last year) and the equity markets (the Shanghai index rose almost 100% last year)

This final point is key in that China’s economic policy AND financial markets have lead their US counterparts ever since the all-time high in stocks in October 2007. Indeed, the Shanghai Index, began its plummet in November 2007 and pretty much fell for like a brick for 12 months.

In contrast, the US’s S&P 500 took its time meandering down, bumping along for most of 2008 before entering a free-fall in the Autumn months.

Thus we see China’s stock market leading the US on its way into the Financial Crisis of 2008. This leading status continued regarding economic policy response to the Crisis with the Chinese government announcing its Stimulus plan in November 2008 while the US announced its own plan in February 2009. As one would expect, this lead to China’s markets bottoming first (November 2008), while the US’s market didn’t find bottom until March 2009.

Thus we see China’s markets leading the US into and coming out of the Crisis. By now you’ve no doubt deduced that smart investors should keep their eyes on China for clues as to what might be coming down the pike for the US market.

With that in mind, I wanted to note that China’s Shanghai index  (black line) has been in decline since late December. In contrast the S&P 500 (red line) only began to follow suit in mid-January. And while US stocks have just begun to bounce from a rough couple of weeks, China’s market continues downward.

Of course, we must note that China’s decline is largely a result of its Government curtailing lending and easy credit in the People’s Republic (there has been no similar change in US policy, though it’s worth noting that the Fed’s various purchasing programs are due to expire in March if not renewed).

With this in mind, I would urge US investors to be extremely wary of this latest bounce. If China’s market continues to serve as a leading indicator, there is plenty of more trouble coming for US stocks.

If you haven’t already taken steps to prepare yourself for a rough 2010, take advantage of the current bounce in US stocks to do so. I can show you how.

Good Investing!

Graham Summers

http://gainspainscapital.com

PS. I’ve put together a FREE Special Report detailing THREE investments that will explode when stocks start to collapse again. I call it Financial Crisis “Round Two” Survival Kit. These investments will not only help to protect your portfolio from the coming carnage, they’ll can also show you enormous profits.

Swing by www.gainspainscapital.com/roundtwo.html to pick up a FREE copy today!

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2010 Copyright Graham Summers - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Graham Summers Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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