The Biggest Risk in Global Economy (part 1)
23 September, 2010, 14:00. Posted by Zarathustra
Tags: Economy
Don’t get me wrong, but it is not in United States, nor in Europe.
Just as everyone doubt if the developed world will truly recover any time soon, the risk is actually outside. While the S&P 500 has pretty much moved sideway for the best part of this year (Green line), the Shanghai Composite declined 20% (Orange line):
Source: Bloomberg
At first glance, it is puzzling. Chinese economy is probably among the fastest growing today, and corporate earnings look good. How should we make of this? It seems that stock investors in China are getting so much more pessimistic than their counterparts in US! If the stock market is indeed a good leading indicator of where the economy is heading, this is actually quite alarming.
I have actually got ever more sceptical on the seemingly optimistic mood China has on everything. They are big spenders when they travel, buying ever more Louis Vuitton and Chanel. They also go real estate shopping everywhere, from Hong Kong to Japan, from London to Dubai (there was once news in Hong Kong Chinese media that some Chinese went to a region of Japan to buy apartments because a popular Japanese TV drama was filmed in that region!). And as the matter of fact, despite series of cooling measures, home prices in China did not really drop.
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About Zarathustra
Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.