Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19
Central Banks’ Gold Buying and Repatriation Spree - 28th Nov 19
Another Precious Metals’ Reversal Coming Right Up! - 28th Nov 19
Stock Market 100% Measured Moves May Signal A Top - 28th Nov 19
Don’t Look for Investing Advice in the Media - 28th Nov 19
Why You Should Buy Trailer Park Stocks - 28th Nov 19
Will YouGov General Election Forecast 2019 be as Wrong as their REAL Forecast was for 2017? - 28th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

China the New Leader in Asian Stock Markets

Stock-Markets / Chinese Stock Market Jan 06, 2009 - 10:40 AM GMT

By: David_Urban

Stock-Markets Best Financial Markets Analysis ArticleHistorically Asian markets tended to follow Japan as Japanese equities provided regional leadership over other developed markets such as Hong Kong, and South Korea. However, in the coming market cycle Japan may find itself replaced by the Chinese markets as the Chinese economy begins to recover from the global slowdown.


Currently, Japanese equities offer attractive valuations; selling for a significant discount to the S&P500, a competitive dividend yield, and slightly higher ROE. However, demographic, political, and cultural changes within China may cause investors to reassess the stock market leadership of Japan.

Income and spending growth has slowed to a snail’s pace in Japan while the economy continues to fight the effects of deflation. As this looks to continue for the foreseeable future, it appears as though Japan will have difficulties rising out of the malaise which has plagued the economy and stock market for almost two decades. Slow economic growth at home and abroad will put a damper on efforts to increase personal incomes and retail sales.

As Japanese investors continue to focus on savings rather than spending in an uncertain economic climate it becomes difficult for the consumer to provide a solid base for the economy. Without a strong consumer presence, the role of leadership within the economy falls upon the shoulders of government and businesses. Slow economic growth will cause businesses to retrench in order to ride out the storm leaving the government as the final leg to keep the economy going.

In contrast, the Chinese economy registered 9% growth in the 3rd quarter of 2008. Personal income and retail sales also registered strong year over year gains. It is not to say that China will contract the ‘Olympic disease’ of slower growth in the years following the Olympics but even if growth contracts to the 5% range it will be strong compared to the US and other developed regions.

With the global economic slowdown trickling down to the Chinese economy, the government has responded aggressively by lowering interest rates, cutting a 28% tax on exports, and adding almost $600 billion dollars in new spending through 2010 in an effort to keep the economy afloat.

The Chinese will be able to fund the stimulus plan from foreign exchange reserves (country savings) rather than the US plan of funding the program through the issuance of debt. This makes the Chinese plan less inflationary than the US plan.

On the bright side, inflation has slowed to 4.6 percent while urban disposable income rose by 14.7 percent in the first nine months and rural incomes rose by 19.6 percent. Next year should see a slowdown in both income and spending growth while inflation continues to fall.

An important point that people are missing with respect to the Chinese economy is the construction of GDP. During the first half, consumption contributed 50.2 percent of economic growth while investment contributed 44.9 and exports 4.9 percent. Last year, exports contributed just 21.5 percent of economic growth. As the Chinese economy grows and matures the consumer is taking a larger and larger role in the economy while exports are decreasing. This will help to soften the dropoff in exports during the coming year.

People in the US think of the Chinese economy as being primarily export based but they do not realize that the retail sales market trails only the United States in size.

As export growth slows and the Chinese consumer contributes a greater share to economic growth allowing China to become more self-sufficient and less export driven in contrast to Japan where slow consumer demand and wage growth is combined with a slowdown in export growth.

The recent agreement with Taiwan will increase economic ties and help bring down trade barriers within the region. While the press obsesses on political issues relating to China and Taiwan, economic measures have moved both sides closer together. Where political differences lie, economic agreements and growth will help soften hard feelings built up over time.

For a number of years, Taiwanese businesses have been hamstrung by capital controls and the stock markets have been unjustly penalized with low PE ratios in general. This should change in the coming years.

When the market turns positive it would be wise for investors to look to China as the leader instead of Japan. A number of Chinese ETF’s and other investment vehicles currently exist and would be well positioned to capitalize on the future leadership of China in the Asian markets. These funds should benefit from a confluence of factors to follow on the coattails as China leads the Asian markets in the next business cycle.

By David Urban

http://blog.myspace.com/global112

Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author.  We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. 

Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile.  This is not intended to be investment advice or a solicitation to purchase any of the securities listed here.  I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

David Urban Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

6 Critical Money Making Rules