China Now Down Over 40% from Highs

Since peaking on October 16, 2007, China's Shanghai Composite has fallen 40.8% over a period of 109 trading days.

To put these losses into perspective, we plotted the Shanghai Composite's declines along with the declines of the S&P 500 during its nasty bear market from March 2000 to October 2002. As shown below, the S&P 500 didn't hit -40.8% until the index was very close to its bottom in 2002, and at its low, the S&P 500 was down 49.1%.

It's hard to get a true feel for the current sentiment in China since we don't live there, but one has to assume that recent months have been very, very painful -- especially for those that were the last to open one of the record 100 million brokerage accounts reached last year.

click to enlarge

Comments

[Mr. Zhao]

I think PE should go down to around 20-25 meaning Shanghai index goes down to around 2800-3000. Though it's painful for shareholders, it's good the bubble got bursted before it got too much worse and bring even more pain in the long run. Hopefully the market will consolidate around this level and just give us 15-20% returns annually.

[Sinocracy]

I can't help but feel sorry for the Chinese investors who put everything into stocks, and have seen the sharp decline as time goes on.

[QuestioningLogic]

Choosing a well established index like the S&P 500 Index and comparing it to the Shangai index is the equivalent of comparing an industrial company from circa 1999 to an internet startup in Feb. 2000.

[wdk]

Okay, we need to look at a lot of factors when considering where the Chinese market will settle.
1) Inflation
2) The global economy and demand for Chinese products
3) Where the Chinese market was in 2006, it's peak level, were it is now, and finally where it will most likely go.
4) The gambling mentality of the Chinese stock market.
5) More banking write-offs coming.

Worldwide inflation over the coming months will not help the Chinese financial markets in my opinion. It will even weaken demand domestically in China, resulting in lower revenues for companies, as each Chinese citizen has let discretionary income. Lower discretionary income worldwide, due to inflation, will further cut earnings.

Yes, the Chinese market is down 40% according to the article. However, where was it in 2006? About 1000 if I remember correctly. It's still up 300% over 2006. It's got a long way to go yet. It's not done diving. Try 1500-1800 for a bottom.

Gambling mentality- Chinese students have been using their tuition money to invest in stocks. Others have been borrowing from their Visas. How do you think they feel right now. And it's still way over priced.

U.S. Arm resets.... We have 45 months of resets to go.... We are only 15 months into it..... This isn't even close to over yet. Countrywide- GONE......... Bear Sterns - GONE..... The housing market's getting worse, mortgages are harder to obtain due to stricter guidelines, every time the Fed lowers rates it results in a weaker US$ and higher inflation, loss of confidence in the US$....etc., etc., etc., (Remember the Pound was the currency of oil until about 1938. The oil producing nations lost confidence in it as a good store of value)

Has anyone even started talking about the Mark-to-Market write-offs? $350 Billion, according to some estimates. Further, most home owners don’t have any equity in their homes and the prices are still falling. The consumer will find it difficult to pull us out of this one…. And it will be difficult for them to spend China or the world out of this mess too.