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2009.07.08
Will China be the next bubble to pop?
Ok ... I know that it has been a long time since my last post but quite frankly I have not found much that I wanted to write about. Over the past few months all we have heard in the financial press has been about so called "green shoots" popping up all over the financial landscape. These clowns would have you believe that all is back to "normal" and it is only a matter of weeks before the previous high of 1550 on the S&P 500 is reached once more. I have just been sitting back and waiting for signs that things are not quite so rosy and that we may see another shock to the system.
China (of all places) may be the next bubble to pop which would send shock waves throughout the financial world. The Shanghai Stock Exchange Composite Index (SSEC) has already fallen from a high of 6000 in October 2007 to a low of about 1500 in November 2008 for a drop of 4500 or 75%. Since then it has regained 33% of its loss to close above 3000 ... a gain of 100% in only 8 months time. Not only is their stock market on a tear but there seems to be a massive bubble in real estate as well. The China Daily reports that house prices in Beijing are now increasing at 6.5% per week (not a misprint) after nationwide property prices fell for seven straight months . See the MarketWatch report at http://www.marketwatch.com/story/beijing-central-property...
Also the BBC news is reporting that China has suffered an embarrassing fail in its recent one year government bond offering of 28 billion Yuan (US$ 4.1). This is a small amount and was only yielding 1.06% but a fail in a government bond issue is not something that you read about every day. China was apparently trying to put the breaks on the economy (lightly) by trying to soak up this small amount of Yuan. The fact that the issue failed to be fully subscribed indicates that the market was unhappy with the interest yield. China cannot afford to raise interest rates in this worldwide economic crisis. If it does it will send shock waves throughout the world financial community. So far this is just a pimple on the backside of the ruling oligarchy in China but it could easily morph into a festering boil. Keep a close watch on this one.
Read the BBC article at http://news.bbc.co.uk/2/hi/business/8139902.stm
Gerry
16:16 Posted in Finance | Permalink | Comments (1) | Email this | Tags: china, yuan, bubble, government bond, housing, ssec
Comments
yeps, China now became a world's giant economics
Posted by: Nyubi | 2009.11.13
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