Again today, all eyes were on the Shanghai Composite Index, which led the advance across the Asian region with a rise of 4.52 percent to close at 2912.

China's largest market has become the barometer, not only for Asian stocks, which seem to mirror its movements on an almost daily basis, but also for the U.S.'s S&P 500. Surprisingly, the S&P and the Shanghai Composite now have an 80 percent correlation.

That means the two markets have moved in tandem 16 out of the past 20 months. It seems Chinese equities have become a bellwether for stocks around the world as the global importance of its economy has grown -- perhaps an unexpected role for a market that is largely closed to foreigners.

But according to a senior market source in China, the Shanghai market is becoming "more open to foreign investors," and its growing importance is a "reflection of liquidity and retail confidence." He adds, "It used to be that the Chinese consumer didn't matter," but that's not true anymore with many Chinese now able to afford luxury items. One concern, he adds, is that "they are now being told to save" -- which would spell bad news for corporate profits and the stock market.

Last week Chinese investors opened only 484,185 new stock trading accounts – a massive drop from the 700,617 opened in the last week of July. Perhaps this is the immediate effect of the threat that the country's regulators might put the brakes on its policy of generous lending. The Chinese market has benefited immensely from the 4 trillion yuan ($585 billion) in stimulus that has been pumped into the economy, with a reported $70 billion going directly into equities.

In today's trading, Hong Kong's Hang Seng followed China's lead, closing up 1.88 percent to finish at 20,329. Best performers included oil producer Cnooc Ltd., which gained 3.2 percent, and electricity-generation equipment maker Harbin Power Equipment Co., which soared 7.9 percent.

Elsewhere in Asia, Japan's Nikkei rose 1.76 percent, closing at 10,383.41. Nuclear power-related builders and suppliers led the day after reports of a 7 billion yen ($74 million) government export subsidy package. On this news, machinery company Ebara Corp. spiked 12.09 percent, joined by Okana Valve Manufacturing Co., which climbed 10.9 percent and machinery maker IHI, which rose 3.5 percent.

If the barometer reads correctly, today's rise in China should be a harbinger of positive moves on the other side of the world, too.


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