The Potential China Bubble and its IssuesOne million trading accounts are opened every week. Money deposited in banks are flowing into the Shanghai and Shenzhen stock markets. Share prices are spiraling ever upwards. Since May 2006, Shenzhen's index had doubled, surging 122% to 1,215 points by the third week of May 2007. Similarly, Shanghai's index has moved up 55% to 4,151 points.
Then, Greespan prickd the so-called 'bubble' by pointing out that this was just unsustainable! He was quoted by Bloomberg as saying, "a dramatic correction" is a-coming. Prior to this, Hong-Kong tycoon Li Ka-Shing also cautioned that these two markets are overvalued with price-earnings ratio of 60 times over!
The reaction?
Shanghai's index only dropped a mere 22.6 points or 5.4 percent. Shenzhen was even tougher! It only shed 8.8 points or 0.72 percent.
Most players expect a correction but believed that the trend remains intact and are continuing to position themselves on these two markets. To the investing masses, the stock markets are just playing catch-up after a four-year delay when the Chinese economy was powering forward.
The coninuing scenario-people are just taking their money out of banks because the value of their money viz-a-viz interest is lower than the inflation rate. They are taking the risk by converting into property acquisition or going into stocks. Also there continues to be a lot of liquidity all around to continue the stocks upward momentum.
"If the market in China should fall, it will affect emerging markets like Malaysia when fund managers reduce their exposure over here." said OSK Investment Bank economist, Sia Ket Ee.
As of now, the Chinese retail market seems to be driven by short term speculators who will dump their shares when they have made their profits. The general impression is the Chinese market is irrational and will undergo a meaningful correction before it can go up further.
There must be a big shake-down so that the weak monkeys will let go!
Quote of the Day:
"The wise person understands that his own happiness must include the happiness of others." Dennis Weaver
Heartsong
Then, Greespan prickd the so-called 'bubble' by pointing out that this was just unsustainable! He was quoted by Bloomberg as saying, "a dramatic correction" is a-coming. Prior to this, Hong-Kong tycoon Li Ka-Shing also cautioned that these two markets are overvalued with price-earnings ratio of 60 times over!
The reaction?
Shanghai's index only dropped a mere 22.6 points or 5.4 percent. Shenzhen was even tougher! It only shed 8.8 points or 0.72 percent.
Most players expect a correction but believed that the trend remains intact and are continuing to position themselves on these two markets. To the investing masses, the stock markets are just playing catch-up after a four-year delay when the Chinese economy was powering forward.
The coninuing scenario-people are just taking their money out of banks because the value of their money viz-a-viz interest is lower than the inflation rate. They are taking the risk by converting into property acquisition or going into stocks. Also there continues to be a lot of liquidity all around to continue the stocks upward momentum.
"If the market in China should fall, it will affect emerging markets like Malaysia when fund managers reduce their exposure over here." said OSK Investment Bank economist, Sia Ket Ee.
As of now, the Chinese retail market seems to be driven by short term speculators who will dump their shares when they have made their profits. The general impression is the Chinese market is irrational and will undergo a meaningful correction before it can go up further.
There must be a big shake-down so that the weak monkeys will let go!
Quote of the Day:
"The wise person understands that his own happiness must include the happiness of others." Dennis Weaver
Heartsong
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