Chinese share prices, after years in the doldrums, have soared for most of the last 20 months -- a rally that has prompted millions of Chinese to take up stock trading. Officials have expressed concern about the pace of the runup, after the benchmark index surged 130% in 2006.130%?!? That's insane. An entire stock market going up 130% in a year? It's not possible for there to be a financial basis for that. The Chinese economy is growing at about 8-10%. This just sounds like wild speculation to me. How much can you trust the balance sheets of the companies in China? How strong are their accounting laws? I don't blame people for getting closer to the exits or just taking their money and running right now.
Tuesday, February 27, 2007
Running for the Exits in China
Today's Wall Street Journal reports that the Chinese stock market dropped 8.8% yesterday. That's the equivalent of a 1100 point drop here in the Dow. The claim is that this was just profit-taking.
A 1-year chart of the Shanghai Composite (SSEC) vs. the Dow. The Dow has had a great year, but it shows up as barely a blip compared to the frantic run-up of the SSEC. Anything that goes up that fast can come down even faster.