Blindfolded on a cliff edge (China's market bubble is on the edge of bursting)

Asia Times ^ | 12/18/2009 | Robert M. Cutler

[SeekAndFind]

MONTREAL - If the Chinese stock market is still an indicator of global investor appetite for risk, as analysts viewed it a few months ago, then that appetite has lately diminished. Perhaps they are finally absorbing some of the revelations about statistical manipulations.

They may also be reacting to more recent revelations warning of bank fraud in China. In one case, the Royal Bank of Scotland is reportedly investigating suspected fraud in its China unit. Client losses could be worth up to US$3 million, the Financial Times has reported, citing local media.

Whatever the reason, neither Chinese nor global stock markets responded favorably last week to the news that Chinese exports fell "only" 1.2% in November from the same period last year. The year-on-year figure for October had been down 13.7%.

Government statements in September that the stimulus would not be rolled back pushed stock averages higher at the time, but these have stagnated over the past month despite the appearance of a continued up-trend. The news that the 8 trillion yuan (US$1.17 trillion) centrally established lending target for 2010 was less than the 2009 figure had no effect; that figure is still twice the level from 2008.

Easy money has strongly encouraged speculation in real estate and the stock market. These sectors are already in bubble mode, and the government fears bursting them. The advance of the Shanghai Stock Exchange Composite (SSEC) average to the mid-3,400s in late July and early August was entirely driven by hot money following government spending in support of domestic consumption and production by small and medium-sized enterprises.

[Murp]

China is an empty city, full of perception, signifying nothing.

[Yo-Yo]

Yeah, the China index looks bad for the week

But it's still holding it's own for the year.

[proxy_user]

When bubbles burst in China, armed men march.

[TigerLikesRooster]

Ping!

[PGalt]

Interesting article and graphs. Thanks for posting.

[theBuckwheat]

This is the curse that fiat money and fractional reserve banking brings to the common people of the world. In modern times, it comes to us by the Keynesian economics that is almost universally taught by higher education. Yet Ludwig von Mises explained it simply: expansion of credit either by government, banks or by other means, distorts the price and time-value of money which leads those making economic decisions to miscalculate the value of their projects. This leads to overbuilding, over-investing, over-consumption, over-indebtedness and a value bubble. Some event triggers a realization that values are not “sustainable” and an immediate contraction occurs. Values fall to that which is rational, or supportable by the actual level of business productivity. Government attempts to “stimulate” the economy by borrowing oceans of fiat money into circulation.

see: www.mises.org search for “bubble” and “business cycle”. Lots of articles and audio/video lectures too.

[blam]

China Facing Economic, Financial And Stock Market Crash Scenario

[M. Espinola]

High-tech, sub-prime .....every over inflated bubble eventually bursts.

[Oatka]

Double top?

[Yo-Yo]

I’m no technician, and I don’t play the market other than my 403b, but it sure looks like tested resistance at the 14000 level.

[grey_whiskers]

You might enjoy this.

Cheers!