China rebounds as Asian stocks rise to record on Fed’s U.S. predictions

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What a difference a day makes. This morning the Asian press was seeing enough blood in the water to make Jaws happy, but with the end of business today, Asia stocks are soaring. China gained back 1.1 percent after losing 6.8 percent yesterday, a slide that wiped out US$161 billion in market value.

Bloomberg reports:

“The government definitely doesn’t want to see a big correction,” said Howard Wang, who helps manage JF Asset Management Ltd.’s $443 million JF China Pioneer A-Share Fund in Hong Kong. “What it wants is for local investors to think of returns as more symmetrical than they have been. If the market comes off 20 percent, then you’re looking at a social issue.”

Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., and China Petroleum & Chemical Corp., Asia’s biggest oil refiner, were among 19 stocks included in the benchmark that rose by the 10 percent daily limit today. About the same number posted the maximum drop, including Hong Yuan Securities Co., China’s first publicly traded brokerage.

U.S. markets rebounded after the minutes of U.S. Federal Reserve meeting indicated that the government had become upbeat on the future of the U.S. economy. As reported in The New York Times:

Stocks, which struggled for much of the day after markets fell in Asia and Europe, received a midafternoon boost from the minutes of a Federal Reserve meeting that indicated that policy makers had become somewhat more upbeat about the economy. The tone of the minutes, if not the substance, heartened investors, who sent the Standard & Poor’s 500-stock index, the most widely followed benchmark of American stocks, past a level last reached on March 24, 2000.

It still strikes us how much the international media, especially that of the U.S., has come to view the markets in China as a wind dummy for the rest of the world. This from the same article in the New York Times:

The stock market yesterday clawed back to where it was seven years ago during the heady days of technology and the Internet boom — and it had to overcome an overnight sell-off in China to get there. [emphasis ours]

Watching the markets in China has become almost akin to a tennis match, one needs to watch out for whiplash. The only thing more dangerous is taking the western media and all their hysterical predictions for granted. Watch this space in the days to come for news on the Chinese stock market bubble: part two…