Today's Major Market Move - Chinese Stock Markets Down Over 3% in One Day

The Chinese equity markets were down significantly in Monday's trading session, with the ChiNext Price Index being one of the biggest decliners at down 4%.


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We had last mentioned the ChiNext Price Index on June 25:

Of the Chinese equity indexes we track on PikeFin, the worst performer for 2011 is the ChiNext Price Index at -18.4%. The ChiNext index is a listing of high growth companies (i.e. high risk) based in Shenzhen. According to this article on Want China Times, it's barely over a year old and is down over 15% since its inception (it hit 986 on opening day 6/1/2010 and the most recent print was 832).

Since that mention, the ChiNext Index in particular, and Chinese equity markets in general, had rebounded nicely. Part of the rebound was due to the boost that stock markets around the globe received at the news of another Greek bailout. Here is a chart of the % gains of 3 Chinese equity indexes along with the USDCNY (US $ / Chinese Yuan cross in blue):


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There are several issues facing Chinese markets in the near future: a potential popping of the real estate bubble, rising commodity prices (which we've talked about here) and a slow down in the U.S. as a result of reigned-in government spending.

Today's Major Market Move - Abercrombie & Fitch (ANF) Up 50% for the Year

One of the best performing stocks in the U.S equity markets this year has been Abercrombie and Fitch (ticker: ANF). Its nearly 50% gain so far this year puts it in the top 10 of the S&P 500 (Citigroup shouldn't be in the list; they reversed split earlier in the year and we are in the process of adjusting our historical data).



Taking a look over longer time frame, ANF's stock price has recovered to pre-crisis levels, thanks mainly to a big earnings beat in the calendar 4th quarter of last year. (eps estimate: .03, eps actual 1.03). Expectations are now high for the calendar 4th quarter of this year where Abercrombie is expected to double earnings YOY.


(Note: the earnings announcement for the calendar 2nd quarter is scheduled for aug 17th).

The clothing retail business in general has received a boost from depressed cotton prices, which are down over 50% from their 2011 high. Of the commodities we track on pikefin.com, cotton is by far the worst performer being down 35% since the beginning of the year (wheat is the next worst, down 14%).



Part of the reason for the decline in cotton prices may be the result of a less expensive cotton alternative being developed. From the motley fool:

Other more cotton-dependent companies have turned to natural alternatives. Naturally Advanced Technologies has developed a method of making a cotton-like fabric from flax, which is cheaper and easier to grow. The company is still in the process of commercializing but has already signed deals with the likes of Hanesbrands (NYSE: HBI ) and Levi Strauss.

(Click here for a larger view.
Click here for the current performance of stocks in the S&P 500.
Click here for a chart comparing % growth of eps estimates, eps actuals and stock price.
Click here for the current chart of cotton futures.)