Red-Hot Resources

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Wednesday, January 31, 2007

Asian Shockwave

Futures are still down this morning in New York, despite a slew of positive economic data. Why? One factor could be the carnage in China's stock market overnight.

SHANGHAI, China (AP) -- Chinese shares tumbled nearly 5 percent in their biggest one-day loss in eight months on Wednesday amid mounting worries over high stock valuations.

Adding fuel to the plunge are fears the government will step in to curb gains in the market over there.

Regulators might enact new capital gains taxes or other administrative measures if they decide the market is out of control, he said.

Here’s a interesting bit from Bloomberg News (not on the web yet) …

lawmaker Cheng Siwei said the nation's shares are overvalued, adding to speculation the government will step up efforts to slow fund inflows.

“There is already a bubble here,'' said Zhang Ling, who oversees about $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “Concern is mounting that the government will intervene to pop the bubble."

Will this be a brief pullback, or a change in trend? One thing’s for sure – Australia felt the fallout of China’s sell-off. For the sake of positions in Red-Hot Asian Tigers, we need China to get back on track quickly.


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