A nice little bubble is simmering away in China: not the vaunted stimulus-induced recovery, but the country’s stockmarket which is becoming increasingly heated.
Chinese shares closed higher again on Friday, a phrase that has become all too monotonous in recent months as the market has soared.
Chinese shares have now jumped 65% since the beginning of this year.
Media reports suggest that tens of billions of dollars in bank loans are riding in the market; stimulus money that is being parked to earn big profits by banks and other companies before it’s spent.
The main Shanghai Composite Index closed at 3,088.37 points, up 28.12 points, or 0.92% on Friday and more than 5% over the week. The smaller Shenzhen Component Index closed at 12,258.79 points, up 288.07 points, or 2.41%.
Market reports said property was a big driver Friday with more than half of the property shares on the Shanghai exchange rising more than 5% on the day.
Coal shares were also up after the Government reported the first rise in monthly power output for nine months.
The surge in China has all the appearances of an emerging bubble, especially with reports in the local media of high prices being paid for property in Beijing and some other major coastal cities.
The rise in China has outstripped markets in the west and in the three other major emerging markets: Brazil, India and Russia (which is crippled by dreadful banks, a slumping economy and weak oil prices).
Major global fund managers have been piling into emerging markets for three to four months (as reflected in the monthly reports from Bank of America/Merrill Lynch).
As a result developing countries’ share of worldwide equity value has hit a record in the past month.
Bloomberg reported at the weekend that the 22 nations classified as “emerging” by index provider MSCI Inc. comprised 24% of world market value, up from 18% at the start of 2009, the highest proportion since it began compiling the data in 2003.
China’s value topped the $US3 trillion yesterday for the first time since last August, from $US1.8 trillion at the end of last year.
The MSCI Emerging markets Index is up 35% this year so far, 3% more than the MSCI World Index of developed economies.
Bloomberg said that investors poured a record $US26.5 billion into developing- nation stock funds in the second quarter, with China receiving $US3.8 billion, according to data from EPFR Global, a US market research firm.
China was one of the few markets not to take fright on Friday from America’s very poor June jobs figures.
The US market was closed for the long weekend holidays and it was up to bourses in Asia and Europe to carry the load.
They didn’t and closed lower.
Adding to the concerns was an easing in the euro zone’s service with the final services purchasing manager index coming in at 44.7 in June, down from May’s seven-month high of 44.8.
The June reading was the thirteenth consecutive month the index has been below the 50.0 mark that divides growth from contraction. As well retail sales in the zone and in the wider EU fell in may after a surprise rise in April.
The Dow Jones Stoxx 600 Index fell 0.2% last week and is down 4.8% since its most recent peak on June 12. It rose 17.4% in the June quarter.
Indices were down over the week in 8 of the 18 major markets in Western Europe.
London’s FTSE 100 was off 0.1%, Germany’s DAX fell 1.4% and France’s CAC 30 was down 0.3%.
In Asia the MSCI Asia pacific Index lost 0.8% after the 2.2% fall the week before.
For the week, the Nikkei lost 0.6% after rising 22.8% in the June quarter.
In the US the Dow dropped 223.32 points, or 2.63% Thursday night to 8,280.74.
The Standard & Poor’s 500 Index slid 26.91 points, or 2.91%, to 896.42. Nasdaq dropped 49.20 points, or 2.67%, to 1,796.52.
The S&P 500 fell for a third straight week.
But it’s still up 32.5% from the 12-year closing low of March 9.
For the week, the blue-chip Dow average slipped 1.9%; the S&P 500 dropped 2.5% and Nasdaq lost 2.3%.
The S&P 500 has slumped 5.3% since its peak on June 12. It rose 15% in the quarter ended June 30.
In Australia the ASX200 index was down 49.1 points, or 1.3%, at 3828.2 points, while the All Ordinaries index was off 48.6 points, or 1.4%, at 3826.6 points.
Both indexes fell 1.9% for the week.
BHP Billiton lost 87 cents to $33.43 after announcing that it will sell its Yabulu nickel refinery in Queensland for an undisclosed sum and book $US675 million ($854 million) in write-downs on the sale.
That takes its losses in nickel at Ravernsthorpe in WA and Yabulu to around $US4.5 billion by some estimates.
Rio Tinto successfully completed the Australian portion of its $US15.2 billion rights issue.
The shares fell $2.15, or 4.2%, to $49.60 after coming out of a trading halt.
Oil finished under
$US66 a barrel in quiet trading Friday after the poor jobless figures for the US for June were released Thursday.
US crude futures finished at $US65.63 in light trading, down more than $US1 barrel.. It was down around 4% overall.
In London Brent crude fell $US1.35 to $US65.30.
