Bear is coming to China financial market?
The Shanghai Composite Index, the world’s worst performer in past 20 dealing days, may temporarily fall more according to the report of sustainable economic recovery.
Former Morgan Stanley Asian economist Andy Xie, well known as a bearist in China, said the index “should be 2000 or less” which is another 25 percent lower from this position.
Authorities data supports the parlance that banks financing greatly boast both stock market and real estate market in the past few months. It is about time to rein in lending to avert bigger asset bubbles and besides, policy makers noticed the overcapacity phenomena in some industries such as steel and cement.
Even in spite of the tightening credit market, China equities remain alluring spot among global stocks thanks to the nation’s growth potential comparing to the bleak western. In the view of accounting, some Chinese stocks are trading at the steepest discount in the world compared with analysts’ price targets after the month-long slump. Some analysts recently adjusted their forecasting for China’s economy to 9.4% from 8.3 per cent, accordingly, Gross domestic product may increase 11.9 percent in 2010, higher than an earlier estimate of 10.9 percent.
Short term trading will be very volatile but we believe a strong economic recovery is underway in China and remain quite positive on the long-term growth potential. The A share market is undergoing a correction rather than a bursting of the bubble, I forecast the market will perform very well in this month before National Holiday, much better than those conservative expectation.
What I am worrying about is not the economy itself, I am waiting for the moment of real bubble bigger enough.
