Sunday, April 1, 2012

Today's Major Market Move: ChiNext Price Equity Index Declines 8% in Past Week

Chinese equity indexes in general have been showing significant weakness lately with several of them approaching 5 year lows. The most volatile of the bunch that we track and thus not surprisingly also the worst performer of the bunch is the ChiNext Price Index. The ChiNext has dropped 8% in the past week making it the third worst performer behind the usual suspects of Greece and Cyprus:

Click here to go to the live table.
Here's the chart showing the performance of seven Chinese equity indexes compared to GDP growth going back to 2007. Several of the indexes are in the red over that time period, including the ChiNext (be aware that the ChiNext Price Index wasn't established until June 2010).

Click here to go to the live chart.
The GDP growth line in the previous chart is about 6 months stale. The data comes from the IMF and is released biannually with the next release due in a couple of weeks. This means that the last couple of downward revisions to 2012 GDP growth haven't been factored in (and most likely there will be downward revisions to years beyond 2012 as well).

While we're talking about China, let's check in on the USDCNY cross. There doesn't seem to be as much chatter lately about Chinese currency manipulation, very surprising considering that the Republican primaries are still dragging on. Maybe the fact that the Chinese economy is slowing (as measured by GDP) and maybe also the fact that Chinese stocks are weakening have caused some U.S. officials to back off some. Anyway... here's that chart:

Click here to go to the live chart.
The Yuan has pretty much hovered around the 6.30 level for all of 2012. If the Chinese are planning to try to give their economy a boost through devaluation, we wouldn't be surprised if they waited until after the election in November to put that plan into action.

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