Thursday, 30 August 2007

China Stock Market Bubble update

It has been a while since we commented on the "Chinese stockmarket bubble".

It is interesting to note that the foreign press only appear to really care when stock prices fall dramatically and they can shout about "crashes" and impending doom for thousands of students and taxi drivers that have been ploughing every penny they earn (or can borrow) into stock prices.

This blog was initially no different although we did stick our neck out and make some predictions at the height of the last 12 sell off a few months ago.

Here are those predictions from the 25th May:

China's Stockmarket - "how does it work"?

Before the article here is my prediction - let time be the judge.

1. Stockmarket will continue to rise perhaps by another 25-30% over the next 6 months to a year. 5000 could be the psychological barrier that is a digit too far. There will be a series of small hiccups on the way.
2. What will follow will be a trigger than may, by itself, seem quite unimportant that will lead to a widespread sell off of Chinese stocks with perhaps a 10-15% one day fall.
3. Over the next year shares will fall by as much as 40-50% off their all time highs before stabilising.
4. The knock on effect on the world markets will not be as great as some commentators fear but there will be some contagion effect on neighbouring exchanges.
5. Internally, real estate prices will fall and many individuals will be wiped out. Given the large share holdings by the Police, Army and state owned enterprises what happens then is anyone's guess but it could conceivably get quite ugly quite quickly.


So far so good, we have just gone above the important 5000 barrier with only a little pause for breath.

For all the doomsayers - those Chinese investors who stuck with their investment instead of being bounced out by a frenzied media have made over 20% in 3 MONTHS. That is a massive return and beats any bank account paying 5% a YEAR.

This is todays update of the China Stockmarket (from ADVFN - see advert in the sidebar - it has stock prices for all Chinese company share and it is all FREE).

CHINA
A-shares closed higher as large caps rebounded following strong gains on the
Hong Kong bourse and on Wall Street.
The benchmark Shanghai Composite Index closed up 58.46 points or 1.1 pct at
5,167.88.
The Shanghai A-share Index was up 60.85 points or 1.1 pct at 5,426.40 and
the Shenzhen A-share Index was up 29.29 points or 2 pct at 1,512.02.
The Shanghai B-share Index rose 8.33 points or 2.7 pct to 322.23 and the
Shenzhen B-share Index was up 20.56 points or 2.9 pct at 737.81.


So where next, I stick by my predictions but suspect we may get as high as 5500 because make no mistake there are fundamental problems in China that will soon undermine stock prices severely. The fundamentals underpinning each individual stock price are flawed. The political ramifications of a full scale collaspe remain very serious.

My blog post cmparing the Chinese stock market with the NASDAQ in 2000 is telling:

Shanghai 2006-2007 vrs Nasdaq 2000-2001

Other posts that you may find of interest:

China 2007 vs. NASDAQ 2000 - ZEAL analysis

Will a savings tax slow the stock market frenzy?

Who is really inflating the bubble II: Warning on illegal Shanghai share deals

"China bubble" - the political dangers ahead

Chinese Stock Market Bubble Deflates a Little

China by numbers: more on the bubble

"Bursting Chinese Bubble" - a contagion effect?

Who is REALLY inflating the "Chinese Stockmarket Bubble"?

15 comments:

sharetipsinfo said...

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As we can see Dollar is becoming weaker day by day as compared to Indian Rupees, which is affecting IT Sector Still IT sector got lot of potential as is due to zoom up once again.

Moreover Recently we have witnessed that Indian stock market has touched new heights surprisingly IT sector was not part of it.

Now NIFTY is already in overbought zone. We can expect NIFTY and SENSEX to fall bit that is correction is due.

Best strategy now- For investors wait for minor correction and buy IT stocks at dips.

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www.ShareTipsInfo.com Team said...

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Now with time USA is coming out of the jinx of sub prime and recession and we have already witnessed some good movement in US market too. Recent fall in Indian stock market was due to Overbought Nifty, USA recession margin pressure and panic.


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Anamika said...

Markets are likely to open and trade weak for next several days. But I expect Sensex to hit 18,500 by September - October. Investors can buy Vakrangee Software 237, Reliance Capital 1500, Marg Ltd. 275, Petronet LNG 79 and Parsvanath at 225.

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Anonymous said...

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Time changes and with every passing day graphs of stock market changes which in turn changes the portfolio of investor. Like recent fall in Indian stock market
has ruined the portfolio of investors
who were invested in Nse and Bse
listed scripts. They have lost around say 60% of there money. But now once again after that correction in stock market Nifty and Sensex has picked up momentum. But
we again warns all investors that don’t be too over tempted by this rise as its just a minor upmove. Until Nifty doesn’t close above 5300 for 3-4 sessions we are not at all bullish in market. So invest in market for short term or prefer day trading commonly known as Intraday trading.

Apart from it rising price of Crude oil, Rising Inflation is a matter of concern. Though dollar is becoming stronger that will boost IT sector and Exporters.

All in all we suggest be in Indian stock market and if you are investor invest with the proper strategies like go Long for maximum 1 week that too with proper stoploss and target.
If you are day trader be a strict intraday trader then , clear your goals and trade with strict stoploss and target if you want to earn.



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Priya said...

This is a very blog. the way you given information about chinese stock market is very good indeed. This blog will help in educating people about stock market and understand it more clearly. We all know that US stock market has its impact on all the economies of the world. We all must come forward and devise ways to reduce the impact os US share market on other economies of the world.

Sharetipsinfo said...

Hi,

Stock market India is volatile and all those who speculate in market are loosing everyday. Please remember stock market is not for speculation purpose. If one feel investing in stock market is gamble then its better to think again.

One should always note that if they want to invest money they should do proper research be it fundamental research or technical research. Just think how come you can invest
your money without any convincing reason for the same?

Indian stock market is one of the most happening and emerging market. Major Indian stock exchanges are BSE and NSE and both are of world class standards.

So grab good stocks and invest that’s the bottom line.

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