Beware of The Bear
Linda says: Especially the Panda
While some world markets have staged a rebound of varying degrees, a market in the Asian time zone is deflating, quietly behind the scenes of the headlines in Western media.
On March the 27th, the Shanghai market fell to be 45% below its high of six months ago. Whilst China’s well publicized problems with Tibetan dissents have earned widespread coverage, the pronounced hiss of a rapidly deflating bubble in Shanghai, is far more low key in the press outside China.
The fall is symptomatic of an attempt by the Chinese government and central bank to rein in out of control inflation, especially in food prices. Rising food prices equals discontent of the poor, amongst all of the Chinese people, not only the vocal ethnic groups.
So for those depending on the “Great Wall of China”, to shelter them from the consequences of reckless lending and “Made in the USA mortgage mess”-BEWARE!
The Chinese government values political stability (and retention of its own political control) above all else and is now trying to slow the Chinese economy.
For all those economies (and stock markets), which are dependent on the rate of Chinese growth, especially in Asia, a clear warning sound of tougher times is audible. With the US believed to already be in recession, with house prices continuing to fall, a slowdown in China will also adversely impact the world economy.
A bear market of Panda type will infect other stock markets across Asia. Don’t just look to Wall Street for a foretaste of likely events.
