Chinese money supply a headwind for equities
Posted By Prieur du Plessis On May 17, 2010 @ 12:32 pm In Investment,Stocks | No Comments
Over the past few weeks I have often posted articles about the behavior of the Chinese stock market. With the Shanghai Composite Index (SSEC) now having declined by 23.3% since its peak of November 2010, it would seem that Chinese equities have indeed been a canary in the coal main and are now leading global bourses lower. The Chinese stock market was the first to turn the corner after the credit crisis sell-off – a full five months before the majority of indices bottomed in March 2009. The graph below illustrates the SSEC (green line) leading the S&P 500 Index (red line) at both the bottom and top.
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Source: StockCharts.com [2]
“The market environment in China has evolved under a tighter policy stance this year. Faster GDP growth and slower money-supply expansion combined to reduce the country’s excess liquidity, which has typically led domestic stock performance in the past decade,” said U.S. Global Investors in its latest Weekly Investor Alert [3]. Should this historical relationship hold, it would not be surprising to see the SSEC trade lower still and provide a further leash for also pulling other stock markets lower.
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Source: U.S. Global Investors – Weekly Investor Alert [3], May 14, 2010.
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URLs in this post:
[1] Image: http://www.investmentpostcards.com/wp-content/uploads/2010/05/SPX-pc1.jpg
[2] StockCharts.com: http://www.stockcharts.com/
[3] Weekly Investor Alert: http://www.usfunds.com/investor-resources/investor-alert/?CFID=1069743&CFTOKEN=30413546
[4] Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.: http://www.feedburner.com/fb/a/emailverifySubmit?feedId=921608&loc=en_US
[5] (What's this?): http://www.wikinvest.com/blogger/wikinvest_wire
[6] China’s Shocking Trade Figures… and An Even More Shocking Growth Scenario: http://www.wallstreetdaily.com/2012/02/10/china-trade-figures-imf-forecast
[7] The Heart of a China Bull Still Beats Strong: https://moneymorning.com/2012/02/17/the-heart-of-a-china-bull-still-beats-strong
[8] China’s Balancing Act Can’t Go on Forever: https://www.wallstreetdaily.com/2012/02/15/chinas-balancing-act-cant-go-on-forever
[9] Investing in China: http://www.wikinvest.com/industry/Investing_in_China
[10] Wikinvest: http://www.wikinvest.com
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