A Comparison of Bubbles + China

On Monday we compared the rises and crashes of the Nasdaq and the Homebuilders during their respective bubbles.  A Bespoke reader asked if we could overlay the current rise in China's Shanghai Composite on the chart to see where its bull run currently stands in comparison.  The Nasdaq and Homebuilders rallied for around 2,000 calendar days, while the Shanghai has currently only been in rally mode for 560 days.  However, the gains in China of 488% are fast approaching the max gains that the Nasdaq saw of 639% at its peak.

The most interesting data points here are the starting dates of the bubbles.  The Homebuilders began their enormous rise on March 14, 2000, just four days after the Nasdaq peaked.  Interestingly, the Shanghai started its meteoric rise on July 11, 2005 -- just nine days before the Homebuilders peaked.  Investors have seemingly flocked from one bubble to the next.

Comments

[pj]

Thank you for following up on my request. Much appreciated. I'm surprised that the Chinese bubble's duration isn't as long as I thought.

[Mike George]

Can you overlay the Japan bubble of 1990 too?
Thanks

[Viplav]

Appreciate the charts. Even though your comment about investors flocking from one bubble to another apples to Nasdaq and Homebuilders, I am not sure it applies to Shanghai market as Chinese markets are mostly limited to and driven by the Chinese, not US investors and the Fed who were responsible for the Nasdaq and Housing bubbles.

[cordura21]

I went into Yahoo to get the Nikkei bubble in the eighties. Looks like it was a modest bubble compared, but with a much slower, painful death:

http://img216.imageshack.us/my.php?image=nuevaimagendu8.gif

[Lugopt]

I think it's not fair to compare Shangai Composite with the other indexes. Only Chinese citizens can buy stocks in Shangai and they are not allowed to buy them elsewhere. May be they will in Hong Kong in a near future but we don't know yet.
Chinese citizens can only invest they money at 2.5% (much bellow inflation rate) in a savings account or go for stocks.
Shangai is a completely different stock exchange than everything else. We as a foreign people cannot invest in Shangai too, not even can we short that market.

By the way, can someone compare the "bubbles" with Hong Kong Hanseng index or any other Asian indexes?

Thanks,

[Paul]

This is a great analysis. This implies China will run through 2010. The real question: In 2011, what will bubble investors begin inflating?