Thursday, March 22, 2007

Chinese Stocks Rebound, Close at New Record High

Remember the plunge a few weeks ago that triggered a global sell-off? In Shanghai it was a buying opportunity.

From today's
NY Times World Business section, "After a huge sell-off here just a few weeks ago that helped set off a drop in global financial markets, China’s stock market has rebounded and the Shanghai Index rose to a new record Wednesday of 3057.38." (see chart above).

When the Shanghai composite index plunged 8.8% on February 27, it was simply a temporary setback in a galloping bull market. After all, an 8.8% drop is like having a sale on all stock at an 8.8% discount. When Macy's has a sale, it attracts more customers, so why shouldn't a "stock sale" attract more buyers?

BTW, China had the world’s best-performing stock market in 2006 - the Shanghai Composite Index was up 130%. Share prices are already up 14% in Shanghai so far this year.


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