While global stock markets are still on the march, Chinese bourses have been bashed over the past week in Hong Kong and Shanghai. Given China is the leading indicator for this business cycle, first into and out of the virus, with accompanying stimulus, is this the harbinger for global markets?
First up, the correction so far is relatively minor at around 5%. The drop in technology stocks has led it, down 10%:
So, the correction is more severe than developed markets but not out of step with it, being led by the rotation away from tech as inflation rises. Everywhere except China, that is.
As well, Hong Kong authorities announced an increase in stamp duty on stock transactions to 0.13% from 0.10% and that was enough to spook the wider market as the price in the listed bourse was pummeled.
For the most part, then, it’s too early to say that anything beyond a regular correction in China’s higher volatility market is underway here. So far it is noise not signal except to the extent that it reinforces the warning that growth and tech stocks will not like rising inflation.
It remains my view that Chinese growth is going to slow through this year but I don’t think that is so far out of step with global markets and pricing in any macro event.
After all, these days, decreasing economic prospects are bullish for stocks.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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I have been on such a tear since September/October that I am now questioning my mix. I focus purely on Biotech companies as I believe you just focus on what you know so you dont get caught up in the noise.
The challenge is that any industry depends on flows and as good as company is, if it isnt going into the XBI I can be royaly rooted.
I am now considering at what level do I start to implement sound risk management to protect my gains. It doesn’t feel like the party is over, but the ugly lights are starting to turn on in the club and everyone is starting to sober up.
Rising bond yields will not serve speculative biotech well IMHO.
Thank you, time to take some off the table.
“Hong Kong authorities announced an increase in stamp duty on stock transactions to 0.13% from 0.10% and that was enough to spook the wider market as the price in the listed bourse was pummeled”
Meanwhile in Robinhood land, they get it all for free …………. well they think they do.
Munger on SPACS lamented that “the investment banking profession will sell sh!t as long as sh!t can be sold.” and the markets.
https://www.smh.com.au/business/markets/it-must-end-badly-buffett-s-right-hand-man-says-wall-street-is-showing-bubble-signs-20210225-p575pn.html
https://www.youtube.com/watch?v=Pp4CvjNw-9Y&feature=youtu.be