What happened to the China stocks market? Where is the end?
The recent market turbulence in Shanghai Stock exchange really hit hard on Chinese investors. The market dropped 6-7% for the day before and today. The market is pretty much oversold, but I’ve yet to see any bottom forming signal. Yesterday’s market rally has been wiped off again today.
How do you think about the Chinese market right now?
How low it will go?
What’s the fundamental driven for the sold off?
And how does it affect Chinese ADRs if you have any?
Best Answer
4085 points
EthanR answered one year ago …
Interesting question. The Chinese market looked for a few days like it was about to stabilize and technical indicators seemed to be on the verge of turning positive. Then suddenly another gap down the other day. The one thing I look at is where is the support, and in March of this year, FXI, the Chinese Exchange Traded Fund bottomed around 120-125, then ran all the way up to 165.
Since most markets do not bottom with a V shape, my inclination is to think that the Chinese market will retest that March low. If it does not hold, you can expect the market to decline a lot further. If it does hold, we may see a W shaped bottom, and that would be a good place to invest. Right now the price of FXI is 133, so it is not too far off from the March low.
To answer your other question, yes, it certainly does have an effect upon the ADR's. One in particular that I have always liked is Focus Media Holdings (FMCN). If you look at the chart for FMCN, you can see that it has been clobbered, and has broken below recent support. It was said that the recent earthquake in China could slow performance in the second quarter. However, first quarter revenue was strong. This company is solid and is near the lows of late 2006, when it bottomed and then ran all the way up to $66.
