Q: The Chinese markets swooned again?
A: China’s benchmark Shanghai Composite Index tumbled 8.3% to 3,670.40, falling for the third time in four sessions since the government tripled the stamp duty on trading last Wednesday.
The index has now fallen 15.3% from last Tuesdays all-time high of 4,334.92. Nevertheless, unlike the 8.8% plunge on Feb. 27 that prompted sell-offs in global markets, yesterdays drop caused only temporary declines in Asia. Boosted by U.S. economic data that beat expectations, Hong Kongs Hang Seng Index gained 0.6% to close at 20,729.59 while the Hang Seng China Enterprises Index (for H-shares) was up 0.4%.
Alec Young, Standard & Poors International Equity Strategist, wrote: “While the current Chinese sell-off will likely spark some healthy short-term profit taking in global markets, we doubt the ramifications will be more severe.
S&P expects the Chinese economy, which grew 11.1% in the first quarter, to remain strong as momentum builds leading up to the 2008 Summer Olympics. In addition, with an average annual income of only US$1,500 for the typical person, consumption is not the primary catalyst for Chinese economic growth.
Rather, growth is driven by export manufacturing, lessening the economys vulnerability to a stock market downturn. Lastly, reflecting the infancy of Chinas capital market infrastructure, the vast majority of Chinese wealth is invested in banks and real estate, not the stock market. S&P expects strong exports and ongoing domestic infrastructure expansion to lead to Chinese GDP growth of 10.2% to 10.6% in 2007.
As long as China’s real economy remains robust, we believe the Chinese sales of global multinationals will remain solid, allowing investors to largely ignore short-term volatility in local, and illiquid, Chinese stock markets. Until the economic data out of Beijing softens, S&P believes China will remain a bullish global equity indicator.”
Read Also: Translation Shifts
标准普尔国际证券策略师Alec Young写到:“眼下中国股市的抛盘或会引发全球市场出现健康的短线获利回吐,但我们认为后果不会变得恶化。标准普尔预料中国经济继第一季增长11.1%后,有望保持强劲的发展势头,并延续到2008年夏季奥运会。此外,由于人均年收入仅有1,500美元,中国经济发展的主动力并非来自消费,而是出口制造业,这就减少了经济受股市下滑所拖累的可能性。