What This Weeks Shanghai Index Drop Means For Our Portfolios
It seems for now the world is watching China as a benchmark to compare the remaining global markets. The fact is they have developed into the main financier for the U.S. Now more than ever, China is receiving globally recognition which in turn is increasing their importance in the eyes of institutional investors. On Monday’s session, China ‘s Shanghai Index declined 6.7 percent. This has the U.S. futures on the defensive and everyone is wondering if the China is leading the way to a downside. I believe China’s markets are not steering us towards a downturn and that the recent drops will not have a lasting effect if it gains traction on the Mainland market.
Some of my long-term subscribers may remember my comments several years ago when our market reacted to the fall of the Soviet Union. What does the fall of Kremlin have to do with corporate profits in U.S.? The answer was nothing and next day our markets rebounded and never looked back. This time China may have more impact on market than ever before in our financial history, but I don’t think it will have an enormous impact for more than a few days or maybe a few weeks.
I also have suggested that were no new uncertainties that could trigger a major decline other than a geopolitical situation or maybe a complete meltdown of the Chinese markets. I have personally looked at the charts on China and it looks like they are approaching some major support levels with extremes just about 200 points lower. Also, it appears they are correcting a 109 percent gain and the volatility may continue to unnerve market participant, but no crash is imminent. With that being said, our view still remains that there are more risks in the Mainland markets than in China ADRs traded here.
Committed To Your Profits In China,
Jim Trippon
Editor
China Stock Digest
