Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China Stock Market Crash, A Buying Opportunity?

Stock-Markets / Chinese Stock Market Jul 01, 2007 - 11:51 AM GMT

By: Nadeem_Walayat

Stock-Markets

Millions of chinese small investors have been flooding into the chinese stock market during the last 6 months in ever increasing numbers, as is normally the case they are likely to be the last to enter before the chinese market enters a short but swift bear market.

Over the last 12 months the market has risen from 1512 to a high of 4335, a near tripling in the index. The rise has been fed by speculative fever gripping chinease retail investors, with new recruits to the 'bubble' at the rate of 300,000 per day.


China Stock Market Crash, a Buying Opportunity?
Chart courtesy of stockcharts.com

Technically, the above chart shows -

a. The parabolic up move to the peak in May 07 at 4335.

b. The subsquent second lower top at 4312

c. The wide measuring move between the two peaks of 765.

d. The support zone between 3050 and 2600.

e. The MACD indicator is in a critical overbought state, also a MACD cross has occurred which confirms the downtrend.

The market has been bid up to an expensive state and currently trades on a PE ratio of 45. This is especially apparent when compared with other fast growth markets such as India on a PE of 22 and South Korea on 20. Which highlights the extreme overbought state of the chinese stock market.

Conclusion : The Shanghai Index is targeting a downtrend to between 3000 and 2600. Given the rapid rise to 4335 this is likely to be over a short period of time, possibly to be completed by Sept 07. The fall from the 4335 would represent at least a drop of 33% in the chinease index.

Even though many chinease investors will be hurt to some degree by the fall and there will be some limited impact on the chinease economy. The decline will still represent an good long-term buying opportunity given that China's growth rate is currently running at 10%, even if it takes the market some time to build a base before resuming the bull market. This bull market has many years if not decades further to run so there is plenty of time for short-term overbought states to work themselves out for long-term investors.

There will be some fallout in other stock markets, but it seems that the financial markets have learned from the February falls to 'expect' a downturn in the China given the relatively expensive pricing of China's shares. Therefore the sell offs in other markets are likely to be relatively muted in comparison, especially in markets that are in a technically much better shape, such as Japan.

By Nadeem Walayat
(c) Marketoracle.co.uk 2005-07. All rights reserved.

The Market Oracle is a FREE Daily Financial Markets Forecasting & Analysis online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

christian
01 Jul 07, 14:01
Effects on chinese consumers/workers

The chineese economy has been rising in conjunction with the growing markets and with the growing export surplus.

The market will hurt the economy and consumer spending down in the united states will hurt there export surplus, a bit but they do have emerging markets to sell to, but these markets will likely be impacted by the domino effect of the chinese market taking the DOW down along with derivatives repricing, and then emerging markets will be hit .

America says it has to narrow the trade deficit, but no one seems to be saying there are obviously two ways to do this, and that the only one that makes sense is to keep imports high (cause we need consumer spending to stay strong so other country's can finance us) and INCREASE american exports to cut trade deficit. the deficit may be rising but the ratio of exports to imports in trade with china is rising. i.e we have 20 exports and 50 imports now which is a deficit of 30 but next year we may have 30 exports and 55 imports so while the deficit may grow the % of exorts to imports increaes from .40 to .56


Post Comment

Only logged in users are allowed to post comments. Register/ Log in