6/1/2015 0 Comments
More up days in China
Shanghai stocks are up over 4.5% on Monday and positive Tuesday morning, keeping with the trend of heightened volatility. Add into this the Threats that are looming in Europe about a deal with Greece and it is surprising that there isn't more worry being built into the outside market over these signs of risk apathy. With the markets still looking to the upside I am more convinced that the rally is in a self reinforcing trend. While this is the most dangerous time to try and predict when a fall will occur, it is important to know when things get shaky where risks lie. The only way I see this amount of confidence in Chinese markets now is in the case that investors think the government is managing the rally in equity markets to help companies raise capital through equity as opposed to debt. This could be why there are so many companies in china "going tech", changing their traditional manufacturing companies into on-line casinos or renewable power companies. This is to take advantage of the fact that tech start-ups are seeing the best of this rally while banks, a more accurate measure of the overall economy are relatively flat. Surely a divergence is at hand and will have to correct eventually.
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