On April 16, the Shanghai Composite stock index rose 4.4% and Hong Kong’s market went up 7.9%.
The next day, China’s exports got reported down 15% year-over-year… while the stock index rose another 2.9%, crossing 4,300. The news hasn’t changed, but now it’s over 4,500!
Is that whacky or what?
Exports count for anywhere between 35% to 50% of China’s GDP. Just think of all the made-in-China gizmos and gadgets you might have in your own household! For them, a 15% drop is a big deal.
They’re the largest manufacturing and export operation in the world today. That means you also have to consider all the emerging countries exporting raw materials to China to feed this operation.
With demand dropping over most of the world, this is bad news for the entire global economy.
The truth of it is that I’ve used China’s stock market as a leading indicator for how the global economy is fairing for a few years. It’s been the worst performer of any major country since February of 2010 when a short and feeble bounce ended as the rest of the world continued up.
But since mid-2014 we have a new “junior†bubble that’s going exponential like the last one, though that one was bigger:
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As you can see, that bubble just lasted a little over two years, going up six times from mid-2005 to late 2007. Then, it crashed 72% in just one year.
I’ve said ever since that was a classic long-term 5th wave bubble top — the kind that will not be exceeded for decades, if ever.
Now, in a period of worsening news for the Chinese economy, we have this current last-ditch “mini†bubble.
After nearly retesting its 2008 lows, the Shanghai Composite has doubled in less than a year. The Chinese most like to speculate in Hong Kong’s Hang Seng index, and that’s gone up almost 5,000 points to 28,433 (as of today) just since March.
