Japan's Nikkei Index, the weighted average of 225 stocks in major companies, fell for the 10th day. That has not happened since 1965.
According to the FT, "Rising fears about the impact of inflation on slowing economies took their toll on Japanese and other Asia-Pacific markets." That sounds a bit like the current trouble in the US.
A number of other indicies have had sharp declines lately. The Shanghai Composite has fallen by more than half since late last year. Rising energy and food costs in China have not helped it. Neither have concerns that a recession in the West could cut demand for its exports.
The Nikkei news says two things. The first is that the economies in other large nations may be as troubled as that in the US. Traders often look out several quarters when they make their buying or selling decisions. But, the second, more ominous sign from the Nikkei's decline is that it says that the smart money in Japan believes that the price of oil is not likely to fall. Japan is relies more on imports of crude that the US does.
The tough run for the Nikkei is not restricted to Japan. US and EU markets are likely to set records of their own, and not the kind that traders look forward to.
Douglas A. McIntyre is an editor at 247wallst.com.
Last October, the Shanghai Composite was over 6,000. It now trades at 3,095. According to The Wall Street Journal (subscription required), "The plunge has slashed the savings of millions of Chinese investors who jumped into the market as it rose six-fold in two years." The drop will also make it more difficult for companies in the world's most populated country to raise money.
While investors have been beaten up in the China market, the real question is whether the movement is any indication of what will happen in the broader economy this year. Some economists believe that stock market moves anticipate later increases or decreases in GDP and other measurements of financial health.
In China, the market may indeed portend what may happen in the balance of the year. The country's economic growth has already begun to slow. It is still robust, at about 10%, but that is married with inflation which is about 8%. For food and certain other consumers goods price increases are closer to 20%. An economy cannot survive forever on rampant inflation. At some point the central bank must increase interest rates to cool buying power.
Price increases in China would be even sharper if the government did not underwrite the costs of gasoline and diesel.
The other issue facing the Chinese economy is the it cannot be decouple from the West. A deep recession in the U.S. and Europe will hurt exports from China, and that will drive a sharp cut in its GDP. China's growth rate is almost certain to slow.
And, that will make the Shanghai Composite drop even further.
Douglas A. McIntyre is an editor at 247wallst.com.
The Shanghai Composite moved up moved from 1,330 two years ago to over 6,100 last October. It was a dizzying rise. But, since its peak, the index has fallen to 3,300.
Investors who bet on the exchange have lost 45% of their money in a short time. Some of the key China stocks traded in the US have also dropped sharply. The shares of China search engine Baidu (NASDAQ: BIDU) hit a 52-week high of just over $429 and now trade at $273. The company still has a P/E of 105.
The Shanghai market has been dented for two reasons. First, if stock markets are leading indicators, investors in China are worried about rising inflation and falling exports to the US as the economy here slows. For a country where GDP rises 10% most years and inflation by almost as much, a share drop in growth could do huge damage to the China economy. According toThe New York Times, "there are worries that a prolonged downturn could reverberate through China's financial markets."
China is beginning to admit that slow growth in the U.S. would be a significant enough drag to badly damage its exports and hurt its economy. "If U.S. consumption really comes down, that's bad news for us. That will have a pretty severe impact on our exports," Zhang Tao, deputy head of the international department of the People's Bank of China, told a group including Reuters.
Any slowdown is likely to hit the Chinese stock markets hard. Despite a recent pullback, the Hang Seng Index is up over 60% in the last two years while the S&P has barely risen. The Shanghai Composite is up over 300% during that period.
Downward pressure on China shares could affect many stocks listed in the U.S. Among the most vulnerable are probably those that have risen the fastest. That would include Baidu (NASDAQ: BIDU), which is up about 130% in the last year, and China Mobile (NYSE: CHL), which is up over 70%.
If a U.S. recession hits China, the markets there may have seen their best days.
Markets in Asia took a beating as the Hong Kong Hang Seng fell 5%. Key China stocks moved down sharply. China Mobile (NYSE:CHL) fell 7%. China Petroleum (NYSE:SNP) fell over 10%.
The Shanghai Composite fell 2.5%.
Douglas A. McIntyre is an editor at 247wallst.com.
The Shanghai Composite is up 210% during the last year. Obviously, it is not a bad place for a company to list its stock. All the shares have to do is keep up with the index and everyone should be happy.
China's second largest bank, China Construction Bank, sees things that way. It will list on the Shanghai Stock Exchange, perhaps as early as this month. The financial company wants to raise $7.8 billion.
The bank already trades in Hong Kong, but "of the 44 shares that are listed on both the mainland and Hong Kong, the Shanghai shares trade at 46% premium to their Hong Kong counterparts," according to a report on MarketWatch. That does not make much sense, but its is certainly an incentive for Chinese stocks listed on the Hong Kong Hang Seng to list in Shanghai as well.
At some point IPOs of this size may be a challenge in China. The liquidity may not be there to fund them. But, right now, that days seems a long way off.
If a butterfly flaps its wings in Shanghai, does it cause a typhoon in New York? Today, The Associated Press reports, the Shanghai Composite Index fell 8.3% -- more of butterfly buzz. So will the U.S. market shrug it off like it did last week or plunge like it did in February?
In February, the Shanghai Composite fell 8.8% and the Dow plunged 416 points. But last Wednesday, the Shanghai Composite lost 6.8% and the Dow was up 184 points. The cause of the latest Shanghai Composite tumble is higher odds that the Chinese government will raise a trading tax. Last Wednesday it raised the stamp duty tax from 0.1% to 0.3%.
The reason for the Chinese government's move is to stop Chinese citizens from opening new accounts. But it's not working. More than 400,000 brokerage accounts were set up on May 30, exceeding this quarter's daily average of about 300,000. So investors fear that the Chinese government will raise the tax some more.
This has hit the Chinese market hard. According to TheStreet.com, the Shanghai Composite has lost 15% of its value in the last week -- still up 37% in 2007. But the U.S. does not seem to be panicking. Dow Jones Industrials futures are down 32 points and Nasdaq futures down 4 as of 7:30 a.m..
The Shanghai Composite moved up moved from 1,330 two years ago to over 6,100 last October. It was a dizzying rise. But, since its peak, the index has fallen to 3,300.
If a butterfly flaps its wings in Shanghai, does it cause a typhoon in New York? Today, 
Comfort Zone Investing: Getting beyond today
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
