The largest drop in the Chinese Stock Market has occurred as the market crumbled in a horrific and devastating meltdown. Former Federal Chairman Alan Greenspan warned about this a couple of weeks ago and still no one listened. The Shanghai Composite Index has been slammed into submission. It is a wonder how people actually believed that it would never go down and continue to climb forever.
Indeed this irrational hopefulness is always a sign of a market top. Increased regulations to control the gambling casino came too late and the triple taxing trick of Chinese regulators to try to bring some reality into play did not work. A 20% drop in one-week was predicted was about what the Online Think Tank predicted and believe we shall see another minimum of 4% dip.
This major correction has not affected any other World Stock Markets. Taking 25% out of a stock market is a major killer for any market and it was advised and known that this was coming, still few listened and yet today they are quite about less well off on paper. Some, say this is a buying opportunity, but is it really?
Billions of dollars has fled the Chinese market to other safer stock markets; US markets, Hong Kong, Singapore, Australia, UAE and Japan. China as the best place for capital will no longer be seen as a safe 10% year-over-year bet. But for those who study these things and follow World markets, should not be the least bit surprised, we certainly are not.
Remember that the average Chinese stock on the Shanghai composite is selling at 60 times PE where on the US Stock Market S & P they are trading at an average of 17 times PE. So the long-term outlook if China does not keep up her growth is an even further melt down. Imagine how far it might continue to fall using those statistics? Ouch.
L. Winslow is an Economic Advisor to the Online Think Tank, a Futurist and retired entreprenuer http://www.worldthinktank.net
Currently he is planning a bicycle ride across the US to raise money for charity and is sponsored by http://www.Calling-Plans.com and all the proceeds will go to various charities who sign up.