China Looks Set to Be the First Major Economy to Recover from the Global Meltdown
Since the first of the year, China's Shanghai SE Composite Index is up by 23.5%, and is up 36% from the early November bottom (see chart above).
Dennis Gartman discussed China's stock market in today's The Gartman Letter, and wrote:
We’ve included a chart of the Shanghai Composite Index, for since the start of this year China’s markets have led the way higher. We are convinced that this trade in China’s favor has only just begun, for China, as we have said many, many times in the course of the past two or three months, is doing more things right and more things “capitalist” than nearly any other country in the world. When it was clear that the economy was softening, and when it was clear that share prices had become too over-sold, the Bank of China moved not only to reduce interest rates, but it moved swiftly and materially to reduce reserve requirements. Other central banks moved at the edges of their money markets to push rates lower; the BOC took a 2x4 and chose to hit the mule in the centre of its forehead to get its undivided attention. That has paid off handsomely. It shall continue to pay off in the weeks and months ahead.
From Bloomberg: The benchmark Shanghai Composite Index has surged 24% this year, the world’s best performer. The rally in Chinese stocks should improve domestic consumer sentiment and encourage spending on big-ticket items such as cars and stimulate the property market.
More from Bloomberg, "China looks set to be the first major economy to recover from the current global meltdown,” said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong. “China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008, when the financial crisis worsened to a near collapse.”
Some commodity prices signal a tentative recovery may be under way, as Chinese companies rebuild inventories. China’s imported iron ore has climbed 28% to 690 yuan per metric ton since the end of October. Hot-rolled steel has surged 41% from Nov. 13 to 4,027 yuan per metric ton. The Baltic Dry Index, a measure of shipping costs for commodities, has more than doubled since Jan. 28.