Chinese Stocks Crumble
I've written recently that the general market structure has changed this year. I've also written that Chinese and Russian equities are in a blow upwards similar to the enthusiasm in U.S. equities in 2000. As I've stated bubbles typically come in pairs and I expect global investors are very unprepared for another bout of serious declines in asset prices be it now or any time in the future.
More than half of the listed shares in China fell by their limit of 10% today. This is after last year's devastating declines in emerging markets, murderous declines in the Middle East oil driven markets and a prior blow off then mini crash in Russian equities that I've written about extensively. I already see people writing off the Chinese speculation stating it will not affect the Chinese economy. Well, losing $10,000,000,000,000 of market capitalization in the U.S. in 2000 surely didn't help the economy. So may I ask what these pundits are thinking?
Remember, China's regulatory control over financial markets is ungodly weak and many of these companies are government controlled institutions. I have written extensively of risk in emerging markets and risk where investor protections are very weak. Will the selling continue? Will the communist government in China be able to pre-empt a rout with intervention? Will they try to intervene? Will market manipulation even work? We don't know where this will end but it likely won't be a happy ending. This coincides with what may be the final stages of a second speculative top in the U.S. to marry the one in May of 2006. It's no coincidence I timed the chart of gold to be up yesterday.
Remember, what happens to the global resource play if China's equity market experiences a major decline? That includes gold, copper, oil, zinc, nickel, lead, etc. We have to see how events unfold but I expect the recent move in gold is a speculative coincidence with the speculative emerging market blow off we are witnessing.
More than half of the listed shares in China fell by their limit of 10% today. This is after last year's devastating declines in emerging markets, murderous declines in the Middle East oil driven markets and a prior blow off then mini crash in Russian equities that I've written about extensively. I already see people writing off the Chinese speculation stating it will not affect the Chinese economy. Well, losing $10,000,000,000,000 of market capitalization in the U.S. in 2000 surely didn't help the economy. So may I ask what these pundits are thinking?
Remember, China's regulatory control over financial markets is ungodly weak and many of these companies are government controlled institutions. I have written extensively of risk in emerging markets and risk where investor protections are very weak. Will the selling continue? Will the communist government in China be able to pre-empt a rout with intervention? Will they try to intervene? Will market manipulation even work? We don't know where this will end but it likely won't be a happy ending. This coincides with what may be the final stages of a second speculative top in the U.S. to marry the one in May of 2006. It's no coincidence I timed the chart of gold to be up yesterday.
Remember, what happens to the global resource play if China's equity market experiences a major decline? That includes gold, copper, oil, zinc, nickel, lead, etc. We have to see how events unfold but I expect the recent move in gold is a speculative coincidence with the speculative emerging market blow off we are witnessing.
<< Home