As China begins to taste the ups & downs in the markets, its appetitive for taking risks and aligning itself with global speculators will only increase in the near future
Snowstorm, subprime-blows and dollar-hurricane, all seem to be acting in tandem to pull down Shanghai Stock Exchange from maintaining the bull run. The rather laid-back Chinese markets, which had hardly seen much activity during 2000-2005 (the index had stuck to 1,000 mark, despite strong economic fundamentals), had suddenly caught on with the global financial trends in the past two years – registering an all time high of 5,500. But the first month of 2008, caught the bull by the horns, paving way for the bears to pierce the bubble, based on over-valuations and high rate of speculations seen in the Chinese markets. According to experts, the Chinese shares before the current fall was trading at “price-to-earning ratios of 50 and forward ratios of 40.”
Now, the Chinese investor is certainly not very familiar with these bulls & bears parlance. It is only in 1994 that the bourses first opened in the communist mainland and it is for the first time that China is experiencing a market meltdown. “The typical Chinese household still has over 70% of its savings in bank deposits, compared with 30% in Japan, less than 25% in Europe & less than 20% in the US. Even India, whose per-capita income is less than half that of China’s, the average household has only 40% of its savings in banks, the rest in bonds and equities,” says Steven Xu, Chief Representative, China, with the Economist Group.
Snowstorm, subprime-blows and dollar-hurricane, all seem to be acting in tandem to pull down Shanghai Stock Exchange from maintaining the bull run. The rather laid-back Chinese markets, which had hardly seen much activity during 2000-2005 (the index had stuck to 1,000 mark, despite strong economic fundamentals), had suddenly caught on with the global financial trends in the past two years – registering an all time high of 5,500. But the first month of 2008, caught the bull by the horns, paving way for the bears to pierce the bubble, based on over-valuations and high rate of speculations seen in the Chinese markets. According to experts, the Chinese shares before the current fall was trading at “price-to-earning ratios of 50 and forward ratios of 40.”
Now, the Chinese investor is certainly not very familiar with these bulls & bears parlance. It is only in 1994 that the bourses first opened in the communist mainland and it is for the first time that China is experiencing a market meltdown. “The typical Chinese household still has over 70% of its savings in bank deposits, compared with 30% in Japan, less than 25% in Europe & less than 20% in the US. Even India, whose per-capita income is less than half that of China’s, the average household has only 40% of its savings in banks, the rest in bonds and equities,” says Steven Xu, Chief Representative, China, with the Economist Group.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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