China – What Happenned?

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China's Shanghai Composite posted its worst move since November 2010 as the property index fell -9.3% and 90 stocks were limit down.Why?

Image Courtesy Nigel Jones: http://www.flickr.com/photos/nigejones/

1)  One brain cell reason: The government has made it clear it will be enforcing rules and making new ones on the property market to keep from (additional) overheating.

The headlines read that the government will be enforcing a 20% tax on all gains from home sales and making required down payments on 2nd homes larger and raising interest rates on mortgages.

The market wasn't helped by the perfect timing of a CBS 60 Minutes piece last night on the property bubble in China.

2) Two brain cell: The Services PMI despite the 12 th straight month of expansion the number was back to September levels and 2nd weakest in years.

3) Third brain cell:  The National People's Congress begins tonight and there is plenty of nervousness about what they will say regarding growth vs. inflation.

The difference here may be subtle but will have major impact on the stock market. Overall, China and the U.S. Dollar are beating commodities up. IF China is going to signal slower growth, get out of the way of already weakened miners, and specifically iron ore.

Readers can gain exposure to the China's markets via the iShares FTSE China 25 Index Fund ( FXI , quote ) and China's real estate market through the E-House (China) Holdings Ltd ( EJ , quote )



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , International , Stocks

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