Five is the new one! We’re referring to the big gaps up and down in China’s CSI 300 index. It used to be one percent up or down was a big move in one day. But China is the Texas of Asia. That is, it seems to do everything bigger, including fall apart.
The benchmark of big shares in Shanghai and Shenzhen has shed nearly 15% in the last trading week. If you’re keeping score at home, that’s US$350 billion in market value gone. Yet overall, the CSI 300 is still up 40% for the year. That’s not a bad year’s work, especially for half a year.
What’s interesting is how the big red bust has been confined largely to Chinese markets. That’s mainly because China’s stock market is comprised largely of Chinese investors. Foreigners haven’t piled in the booming indices…because they can’t.
Maybe that is the next stage of the meta-bubble in global equities…when China lifts capital restrictions so investors can buy all the local shares. But that isn’t going to happen any time soon. So we’ll have to look elsewhere for the next phase of the meta-bubble.
By the way, there’s a tidy little profit boom going on right here in Australia. The Australian Bureau of Statistics reported that gross operating profits for Aussie firms were 17.1 per cent higher than the same time last year. That added up to about AU$47 billion in profits for the corporate sector. Look for an increase in your pay packet soon.
The Daily Reckoning Australia