Want to See a Bursting Bubble?

With Chinese growth and prosperity displayed on our TV sets each night throughout the Olympics, it's hard to imagine that China's stock market could be doing so poorly.  But in a classic bubble pattern, China's Shanghai Composite is now down 60% since just last October.  It is now just 9% above its highs from 2001, and it is on the verge of giving up nearly all of its parabolic gains following its breakout in 2006.  Anyone hoping that the Olympics would give ailing Chinese stocks a boost have gotten a rude awakening.  Since the opening ceremony on lucky 8/8/08, the Shanghai Composite has had three straight daily declines of 4.47%, 5.21% and 0.52%.

 

Comments

[Nick Gogerty]

Called it last year. 10% more to go. and most likely significant political change in 8-12 months if group hedonics work.

http://nickgogerty.typepad.com/designing_better_futures/2008/03/china-08-09-the.html

[unimpressed guest]

Oh Hush. You called nothing. You picked the top 6 weeks too early, so put away your thesauraus. Anyone who couldn't see it was too high in October (Global Equities, for that matter) was an idiot, or a layperson, who probably "called it" when the sun rose this morning as expected. Go read Hume and keep your links to yourself.

[curious]

So what is the china market P/E now?

[Truth or Talk]

I can't statistically prove this, but when the mainland banks went IPO a few years back, I don't think I'd ever seen such glib bullishness. The analyst reports were laden with many risk factors particularly with the consensus groupthink at the time calling for "real" NPLs of 20% or more.

It'll be interesting to see what happens going forward as we no doubt hear stories of Chinese companies who took monies that were supposed to be earmarked for projects but were instead invested in the markets.