China’s main stock market is under pressure this morning; We should expect some spillover across Asian Markets, Europe and the US.
The WSJ observed:
"Shanghai’s benchmark stock index plunged nearly 9% on
Tuesday, its biggest drop in more than 10 years, as investors unloaded
shares to lock in profits after recent gains. Asian-Pacific markets
ended mostly lower.
The Shanghai Composite Index tumbled 8.8% to close at
2771.79, its biggest single-day decline since it fell 9.4% on Feb. 18,
1997, just after the death of Communist Party elder Deng Xiaoping. The
Shanghai index had gained 1.4% on Monday to 3040.60, extending a spate
of record high closes."
Here are the closing prices throughout most of Asia and the Pacific Rim:
 |
| ASIA MARKETS | ||||
| PRICE | CHG | %CHG | ||
| Australia | 5977.60 | -44.30 | -0.74% | |
| Hong Kong | 20147.87 | -360.08 | -1.76% | |
| India | 13478.83 | -170.69 | -1.25% | |
| Indonesia | 1764.01 | -19.94 | -1.12% | |
| Japan | 18119.92 | -95.43 | -0.52% | |
| Malaysia | 234.67 | -7.48 | -3.09% | |
| Pakistan | 11378.02 | -15.67 | -0.14% | |
| Philippines | 3331.29 | -48.71 | -1.44% | |
| Singapore | 3232.02 | -75.90 | -2.29% | |
| S.Korea | 1454.60 | -15.43 | -1.05% | |
| Sri Lanka | 2996.49 | -15.83 | -0.53% | |
| Taiwan | 7901.96 | 1.76 | 0.02% | |
| Thailand | 683.95 | -4.75 | -0.69% | |
|
||||
| Sources: Dow Jones, Reuters | ||||
Source:
China’s Market Slides Nearly 9%;
Regional Indexes End Mostly Lower
CHRIS OLIVER
WSJ, February 27, 2007 5:52 a.m.
http://online.wsj.com/article/SB117254549199120257.html?
Greenspan speaks in Hong Kong and the Chinese stock market drops 10% the next day.
Coincidence? I think not!
I’m sure in his speech, aside from warning about a U.S. recession, he advised Chinese investors to buy Chinese stocks on margin.
Also worth noting: the degree to which Chinese stock analysts have borrowed from their U.S. brethren in offering fatuous explanations for market drops.
“It was due to pressure from profit taking,” said Weng Chen (not the real name)
Anyone know what the catalyst for this was?
Risk unwind is the best way to describe the action in global markets as the news behind China’s 9% stk mkt decline will be good in the long term as they take further steps to stop illegal activities and come down on excessive speculation.
China’s mkt as many others were beneficiaries of global carry trades and the reversal today is leading to a sharp rally in the yen, which has been the main source of funding. The tightening of liquidity started with the US subprime unwind and was helped by another BoJ rate hike.
Bloomberg states: the concern is China’s government “crackdown on investments with borrowed money will end a rally that drove benchmarks to records”.
Is that like carry trade and/or margin?
How long will it take for one of the talking heads to be out front and center telling us that the $1.16 trillion (about 2 percent of the global) is nothing about which to be concerned.
WSJ bullish at the top?
“…The tax man may have some good news this year for many owners of Chinese stocks…”
http://online.wsj.com/article/SB117244246208018732.html
The red flags were everywhere. You cannot say that you did not see this coming.
more details on the plunge including a very good marc faber interview
http://immobilienblasen.blogspot.com/2007/02/china-down-9-biggest-slump-in-10-years.html
How long before CNBC trots out Ned Riley, Don Hayes or some equally noteworthy permabull to explain what a terrific buying opportunity this presents?
I’ll set the over/under at Power Lunch.
Durable orders look pretty ugly, too, though that was telegraphed by inventories.
my broker just called. he wants to liquidate my futures account. I said, “what you want to lend me even more money to double down?” He said, “No my boss said to liquidate your account”. I said “so thats what they meant by ‘liquidity bubble'”. I see said the blindman, I see.
The US markets opened sharply lower, but I am struggling to see how a bubble bursting in China would be bad for US businesses. Since we buy a lot more of their goods than they buy of ours wouldn’t a slowdown in China result in lower prices for imports to the US? It could reduce inflationary pressure on basic materials and energy as well. This would pressure mining and energy sectors, but would help a lot of other sectors. Someone convince me why this would be bad for the US stock market overall…
reply to dan. thanks man, got a great laugh out of your post. “buy more on margin”, you’re killing me.feel sorry for those folks in china but it’s doing wonders for my short positions here. regards.
Say what you will about Hays, he is not a perma-Bull. He has flipped bullish and bearish several times since 1998.
My biggest problem with him is he seems to have gone off the deep end politically after the start of the Iraq war — a mashup bwetween a super patriot/far right winger combined with his more recent bullish pronouncements.
I have been reading him less and less ever since he went all political on me; I thought he might be sacrificing his discipline and model for some pretty wacky politics.
“as investors unloaded shares to lock in profits after recent gains”.
This comment kills me ever time I see it offered up by the print media or Maria Fartaroma or some other bubblehead on CNBC. I have to ask, where are all these profitable traders? As for me, I’m flat ytd as I’ve been 70% in cash most of the year so far. I hope what Jeff Saut calls a “selling stampede” has begun ’cause another few days like today and I can start picking thru the trash heap.
When was the last time all 30 DJI components traded in the red? This is nothing. 2%? Wow, numbers not seen on the boards since, since… Feb 12th? Two weeks. I appreciate the markets sending this warning out for everyone to see. It will be interesting to see who listens.
It will be very interesting to see what happens to the U.S. dollar in the next few days. As China is recycling “hot money flows” into U.S. treasuries (See paper by Nouriel Roubini on this) a continued decline in the Chinese stock market could cause hot money flows to decline substantially. There should be a knock-on effect on the U.S. dollar.
http://www.theonion.com/content/node/43414
As noted by the WSJ – via a coworker, stocks in China are limited to a 10% drop per session and many major companies met that limit. I wonder what tomorrow will bring…
Breakfast Links: Three Series of Related Events
Ok, lets start with this First, Greenspan goes and says that the US is headed for a recession towards the end of the year or maybe 2008. Then Chinas markets take a dump. Then the US Markets go to the toilet, which is bad enough, bu…