NEW YORK: Chinese officials are scrambling to stop a plunge in the country's stock market, shutting down half of its market from skittish investors and forcing brokerages to pony up billions to prop up shares. The Shanghai composite lost another 5.9 per cent Wednesday and is now down more than 30 per cent since peaking June 12. The impact on Chinese investors is direct, but for investors in the US, Europe and elsewhere, it's not as simple.
By Max Magee
While the market was positive last week for the first time in six weeks, speculative segments continue to struggle, weighed on by economic concerns, and, for Chinese names especially, ongoing concerns about accounting irregularities.
As $170 billion hedge fund Bridgewater noted, "new participants are now discovering that making money in the markets is difficult," and sure enough, as WSJ reports, Asian hedge funds have suffered steep losses in June.
The good news for stocks started overnight when the final Chinese HSBC Manufacturing PMI printed well below the 49.4 expected, or at 48.9, the biggest contraction in one year, which meant calls for more easing would be imminent. And naturally, after starting off eark, the Shanghai Composite closed near its highs, up 0.9%.
It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter.
Positive economic data has lit a fire under Chinese equities. Regardless of whether the data is legit or fabricated, accelerated price action for Chinese stocks makes now a good time for a review of the key Internet stocks operating in China.
Chinese Internet stocks combine two of the of the most popular stories for equities post-crisis:
Chinese online real-estate stocks have made a strong start this year, following a significant sell-off in 2014. Three major Chinese online real-estate stocks, namely, SouFun Holdings Ltd (NYSE:SFUN), Leju Holdings Ltd (ADR) (NYSE:LEJU), and E-House (China) Holdings Limited (ADR) (NYSE:EJ), gained 11-14% on Friday.
Macquarie Private Wealth released its 2013 global outlook on Wednesday, predicting U.S. stocks would outperform Canadian stocks again this year and declaring the “resource price boom over.”
The S&P/TSX Composite index has lagged behind the S&P 500 two years in a row now. In 2012, the index rose 7.2%, but trailed the S&P 500′s much more impressive 16% climb. Macquarie expects the gap to continue in 2013 as resource prices hold steady this year.