What the Shanghai Composite Today Says About China Tomorrow

What the Shanghai Composite Today Says About China TomorrowThe Shanghai Composite is made up of several hundred Chinese publicly traded stocks, but is dominated by 50 which include China's largest banks, its largest utilities, transportation, and unity companies. It's as close to a proxy for the performance of shares of public firms in the People's Republic as investors can find.

Oddly, though China is supposed to be a more robust economy than the U.S., the Shanghai Composite is up only 5% in the last year, compared to a rise of 25% by the S&P 500. China's GDP has been growing at a rate of over 9% in the last year. First quarter U.S. GDP grew only 1.8%.

There is a belief among many Wall Street traders that the movements of stock indexes are based to a large extent on what traders think will happen to earnings and the economy over the next six months. That theory has been called into question by the behavior of U.S. markets of late: The U.S. appears to be headed toward another economic slowdown, but the S&P is still trending upward. Yes, the growth rate of the index since early March has slowed from the rate of the previous year, but it's still growing.

A number of China IPOs are listed on U.S. exchanges. Some small ones have recently fallen because of concerns about financial and audit practices in the People's Republic. But, the more likely purchases for U.S. investors are China's big cap stocks like huge oil company CNOOC (CEO) or China's largest wireless provider China Mobile (CHL). Each is listed on the Hong Kong exchange, but neither can dodge the general declining trend in Chinese shares. And, as a matter of fact, China Mobile's share are down slightly in the last year.

So, what about investment in China? There are a number of proxies for trading the Chinese market beyond direct investment in individual stocks. The most popular is the iShares/Xinhua FTSE China 25 Index (FXI). It has traded up 15% in the last year, a growth rate which still lags the S&P 500.

There's more to consider than China's white-hot GDP growth before investing in its largest companies or ETFs. There are concerns about real estate and commodities bubbles. Labor costs are on the rise and the middle class is agitating for better pay. Oil, agricultural goods, and metals prices have spiraled up. The Purchasing Managers Index for China, which measures manufacturing activity, has shown only very modest growth. And China expects a power shortage this summer because the rising cost of coal has cut the profit margins of electric utilities to the bone.

The perception that China is a good place to put investment dollar has weakened recently, which may be why the Shanghai Composite has faltered.



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americandoo

"TIME FOR BIG INVESTORS TO STEP UP TO THE PLATE LEAD AMERICA BY
INVESTING IN AMERICA" "WHEN YOU INVEST IN AMERICA YOU INVEST IN YOUR CHILDREN'S
FUTURE"

"INVEST IN A LARGE PROJECT THAT WILL MAKE A DIFFERENCE FOR THE FUTURE"
Similar to this idea; In past history when the USA needed a Moral Boost to our
Country we built such things as; The Largest Bridges, Dams, Statue Of Liberty,
Worlds Largest Futuristic Fair, Landed on the Moon etc.

It is overdue for us and time for us to build the Largest & Best Futuristic
CITY IN THE WORLD, using ALL OF OUR CUTTING EDGE TECHNOLOGY­.

Countries CUTTING EDGE TECHNOLOGY and BEYOND ALL OTHERS ! !

Find a location in the USA somewhere that has the space for our "FUTURE CITY
PROJECT"

Where Our Future City will Utilize all of the Newest and Cutting edge combined
technology in the world to build our City using entirely GREEN energy with ZERO
POLLUTION ! ! !

Our City Could Have A NEW VERSION OF THE STATUE OF LIBERTY, Holding
the torch in one hand and our GREEN PLANET EARTH in her other hand, her head
raised high looking Up at the sky.

This would make a GREAT FILM based
on a True Story with the help of A TEAM OF BIG MONEY INVESTORS ! ! !

Use your Imaginatio­n think how; GREAT THIS WOULD BE FOR AMERICA & OUR
ECONOMY ! ! ! !

"DREAM BIG...DO BIG"

Thank You, Respectful­ly, Michael V. Caldwell

August 05 2011 at 12:36 PM Report abuse rate up rate down Reply
savemycountry911

mik, You do not post under a flag of this country so it's none of your business.

May 30 2011 at 9:32 PM Report abuse rate up rate down Reply
me817

China's stock market has weakened on the recent stories about their false and misleading accounting that has caused several international accounting firms to refuse to certify their books. They found that the Chinese banks compounded the problem by providing false statements to back up the companies and most had no relation to reality. Now, are you really sure some of these Chinese companies are doing as well as they claimed? Can you afford to take that chance? Just like many Chinese products, the government isn't doing anywhere nearly enough to stop the fraud.

May 30 2011 at 5:40 PM Report abuse +4 rate up rate down Reply
mikcl1

The gop has sold this country out, and are now trying to get the last bit they can from the old people who cant afford to be robbed, like they have robbed the rest of us.
American corporations have moved all thier production to china, so they dont have to pay a living wage to people over here, and then they send this crap back to the united states with inflated price(as though they were paying someone a living wage) and expect us to buy it, you can thank the GOP and thier rich benefactors for this.
Most of these people who claim they are republicans simply can not afford to be, this party uses the bible to try and con people out of votes, they are so moraley bankrupt they cant even find a candidate to run for office in 2012.

Newt ? Palin? The crazy guy in texas, Really?

May 30 2011 at 4:25 PM Report abuse -6 rate up rate down Reply
1 reply to mikcl1's comment
icemanbill23

The GOP...really? That's the focus of your hatred? All of our problems are due to the evil GOP?...Get a clue mik!

May 30 2011 at 5:32 PM Report abuse +4 rate up rate down Reply
John

the s&p was given a golden egg gift by the american taxpaye thats why it went up and it wasnt an up it was a recovery from an inflated bubble of greed that resulted in a dismal crash your analytical mind is comparing a functioning country based on real growth to a disfunctional country based on greed and pilferage where there is 0 infracture growth and an incredible amount of decay I wish I could have gone to college so I could just dismiss the truth like you and burry my head in the stock market in new york and ignore what is hapening in the streets all over America. Bur dont worry your well paid officials in washington will approve another trillion or so that Americas children can finance for you so you can get back to raking in millions into your bank acount wile dooing absolutly nothing in return for it soon enough.

May 30 2011 at 2:37 PM Report abuse -1 rate up rate down Reply
thedtecter

Easy answer: the Shanghai Composite hasn't been propped up by two years of government stimulus, bailouts, and Quantitative Easing.

May 30 2011 at 2:13 PM Report abuse +4 rate up rate down Reply
isalcefus

The bad thing is, everybody knows what stores sell Chinese junk, and they just keep on buying from them, WHY, because they're the only place some can afford! This is like playing Russian roulet, with a bullet in all the chambers!

May 30 2011 at 9:56 AM Report abuse -2 rate up rate down Reply
ireyl42

throw all american investors to CHINA AND TELL THEM TO TAKE CHINES CITIZEN AND DONT COME BACK IN THIS COUNTRY, ESPECIALY THE PRESIDENT WHO BRING ALL THE BUSINESS TO CHINA.

May 29 2011 at 2:38 AM Report abuse -2 rate up rate down Reply
rudder1957

well if the mexicans stop having so many kids we be all right do like china 1 per famliy

May 28 2011 at 2:55 PM Report abuse +3 rate up rate down Reply
pcakepal

Cakesand eggs needs to remember that China has bought $billions upon $billions of Treasury Notes each and every month at auction for many many years. Our financial inability to meet obligations what it is, forces one to hope they don't say,,, "SETTLE UP"... China being the world's lowest producer of goods guarantees their lock on the marketplace and all U.S. mass merchandisers handcuffed to offer the consumer, biggest bang for the buck... All this said, U.S. highest government policy decision-makers, long looking the other way rather than protecting national treasure, have succeeded in bringing the vast majority of our nation's inhabitants to the verge of total economic collapse. I ask you this? With folks having lost their homes, absence of jobs and a future holding little if any hope to produce new money, where do you beileve we are headed, friend? Time to become extremely frugal has long past. It's now time to think solely of survival for many years to come, like it or not.

May 28 2011 at 2:29 PM Report abuse +2 rate up rate down Reply