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Asian Flu!

February 28, 2007

If you ever wondered which nation is becoming the dominant one, look East my friend. China IS the power not only of tomorrow but of today. The saying used to be that when America sneezed (economically), the rest of the world caught a cold. Yesterday, it was the rest of the world following China: down. But one thing no nation has been able to do is match their growth. Last year, the Chinese stock market grew faster than 100%. This morning our 4Q GDP came in at only 2.2%.

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Almost everyone expects the market to rebound after the knee-jerk reaction of Tuesday. But, how much and can it be sustained. Initial 4Q GDP was 3.5% so the 2.2% if a little reality offering.

The Shanghai Stock Exchange Composite suffered its biggest loss in a decade on Tuesday but recovered nearly 50% of that today. The same question holds though: can it be sustained?

A clue comes in the often overlooked “Transports“. Everyone looks at the “Industrials“. The Transports gives us insights as to how much commerce is being moved around the country. Monday it dropped 122 points and on Tuesday 170. The 272 point drop in two days is close to a record: and not a good one.

It just so happens that Ben Bernanke speaks today and he’ll be blamed or praised for whatever the market does today. An hour before the markets open, as I write this post, stocks are poised for a big rebound at Wednesday’s open, less than a day after a huge selloff that included the Dow industrials’ biggest one-day drop since 2001.

But can it be sustained?

Written by Ernie · Filed Under Daily Commentary 

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