Breaking info: China’s $1 trillion bubble burst!!!
By Daniel at 10 August, 2009, 2:43 am
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
It’s easier to finger point than to self-analyze, China now is in trouble.
Most of $1 trillion lend out by Chinese state banks was diverted into stocks and real estate. This is not helping the economy. It will drive investors cash out from the market as the price hit their expectation TOO FAST. Tears for those $1 trillion borrowers who entered the market hoping to make some money back.
China is attempting to forestall economic collapse by pulling a Japan: it’s ordering banks to loan money to industry and trying to ramp up exports despite failing demand overseas. China’s economic growth is largely coming from (1) virtual economy (the proceeds from a variety of speculative enterprises from skyscrapers that have no tenants to the vast commodity stockpiles which have overflowed warehousing and are now anchored offshore as well) and (2) pushing out other exporters. Neither strategy is sustainable or adding to global growth. The first is just leading to inflation–hence rumors of a coming, dramatic tightening order–and the other is depressing the economies of other exporting countries, yielding no net improvement in global economic conditions.
“China followed US’ bad example and just blew 2 big bubbles in itself. Call them “Knock-Off Bubbles”:
“…But while investors expect the market — up more than 80 percent this year — to keep rising, Chinese leaders are alarmed. They worry that too much of the $1 trillion lending binge by state banks that paid for China’s nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.”
“…It’s a very serious threat. The Chinese government is walking a tightrope,” said Mark Williams, Asia economist for Capital Economics in London. “There is the question of what happens if they rein in lending, because there is really no strong evidence that private sector demand is picking up.”"
http://www.msnbc.msn.com/id/32262705/ns/business-world_business/
======================================================
All the government generated “Stimulus around the world is inflating a new bubble. This bubble has no underlying economic fundamentals behind it (as any bubble) and will likely end in tears.
“HONG KONG (MarketWatch) — Early warning signs suggest a bubble could be building in China’s stock market, although it’s too early to know whether this warrants an immediate exit from Chinese equities, analysts said in a recent research report.
Credit Suisse analysts cited similarities between the Chinese share picture today and that prior to the Shanghai Composite’s topping out above the 6,000-point level 22 months ago. That top marked the start of a steady drop to below 1,750 by late last year.
Specifically the broker pointed to an economy glutted with excess liquidity, a surge in openings in stock-trading accounts, and a turnover-to-market-cap ratio that was nearing 2007’s level.
The Chinese stock market “is clearly expensive now, but has not yet reached a full-blown bubble as in 2007. If a healthy market correction does not happen in the next few months, and the market continues to surge ahead, fundamental investors should start to worry,” analysts headed by Vincent Chan said in the note, released Friday.”
===============================================
This bubble burst could trigger another wave of demand reductions from China as investors exit from Chinese equity in GODSPEED. More companies will go under and more people will lose jobs.
It aint just China, the whole planet has is undergoing a monster bubble since March 9th 2009.
Bubbles are now multinational and connected to financial markets around the world. The financial markets are intricately interwoven like big bubbles connected to each other, and the bursting of one bubble can burst the other bubbles.
Look out ,friends!
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Trackbacks & Pingbacks