Implosion of Stock Market Double-Bubble in China Hits New Lows, Authorities Busy Elsewhere Keeping China Miracle from Unraveling

Bigger issues than propping up the stock market beckon.

Today, the Shanghai Composite Index dropped another 2.9% to 2,486.42. In the bigger picture, that’s quite an accomplishment:

  • Lowest since November 27, 2014, nearly four years ago
  • Down 30% from its recent peak on January 24, 2018, (3,559.47)
  • Down 52% from its last bubble peak on June 12, 2015 (5,166)
  • Down 59% from its all-time bubble peak on October 16, 2007 (6,092)
  • And back where it had first been on December 27, 2006, nearly 12 years ago.

The chart of the Shanghai Stock Exchange Composite Index (SSE) shows the 2015-bubble and its implosion, followed by a rise from the January-2016 low, which had been endlessly touted in the US as the next big buying opportunity to lure US investors into the China miracle. Investors who swallowed this hype got crushed again:

Over the longer view, the implosion is even more spectacular. Today’s close puts the SSE back where it had first been nearly 12 years ago, on December 27, 2007. This dynamic has created a double-bubble and a double-implosion, with every recovery rally in between getting finally wiped out. The index is now down 59% from its all-time high in October 2007, the super-hype era in the run-up to the Beijing Olympics.

It is not often that a stock market of one of the largest economies in the world is whipped into two frenetically majestic bubbles that implode back to levels first seen 12 years earlier – despite inflation in the currency in which these stocks are denominated.

During the 2015 implosion, there had been big efforts by Chinese authorities to prevent the market from collapsing further, ranging from arresting wrong-headed market participants to forcing large brokerages and funds to buy the shares. These players were commonly dubbed “the national team.” And there were different lines in the sand that could not and would not be allowed to be breached: 3,500, then 3,000, then 2,700. The latter line in the sand held until September 10, 2018, but then it too got trampled.

So has that “national team” thrown in the towel in face of overwhelming problems? Perhaps. Bloomberg reported that there has been a “twist”:

It’s local authorities who have been most active to cushion what’s been a 30 percent plunge in the Shanghai Composite Index from its January high. Officials in the southern cities of Shenzhen and Shunde as well as Beijing’s Haidian district have moved to help listed firms from their areas, according to local authorities and media reports.

Rather than the across-the-board purchases seen in efforts led by the central government in the wake of a $5 trillion sell-off in 2015, this time around aid appears to be channeled to specific companies in need of liquidity support.

Many are linked to share pledging — the practice of taking out loans using stocks as collateral. Stock slides spur brokerages to dump the collateral, in turn worsening the market rout and making it all the tougher for the companies involved to find financing.

But these efforts have been ineffectual in halting the implosion.

Given the problems China is facing these days, authorities have likely more important things to do than keeping the stock market from going to heck entirely. They’re trying to keep the China miracle overall from unraveling.

The China miracle was based on endless and mind-bending credit creation. But now, many trillions of yuan in “hidden debt” are rolling out of the bamboo forest on off-balance-sheet vehicles. The peer-to-peer lending bubble has collapsed, and consumers who’ve lost their savings are clamoring for a bailout. Auto sales have started to drop sharply, in a sign that consumers might be tapped out. The enormous housing bubble is making authorities quake in their boots. The deteriorating status of corporate debt has been triggering a combination of bailouts and defaults. The Chinese version of the US dotcom bubble of 1999 is beginning to implode. Etc., etc.

With all these things going on simultaneously, the implosion of the stock market is one of the smaller problems that authorities are grappling with, and so maybe they decided to focus their prop-up energies and various “national teams” on the larger issues to keep the China miracle from unraveling.

In terms of global reserve currencies, the Chinese renminbi gains, but remains inconsequential as central banks are leery. Read… US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground

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  61 comments for “Implosion of Stock Market Double-Bubble in China Hits New Lows, Authorities Busy Elsewhere Keeping China Miracle from Unraveling

  1. raxadian says:

    So it turns to be China the first to fall instead of Spain and or Italy.

    Things are gonna be…. interesting.

    • Wisdom Seeker says:

      They’re all going down together. Italian and Spanish stocks are off about as much as the Shanghai and Hang Seng from China. They’re all down 20-35% from the most recent peak.

      • alex in san jose AKA digital Detroit says:

        We can expect the real estate bubble here in the US to keep going for a while longer then, and more “ghost houses”.

        The answer is to heavily tax unoccupied real estate of course.

        • Juanfo says:

          Down here(EM) banks are discounting up to 70% and properties remain on the market for months even years. Most bank held properties not even listed to prevent the real estate market plummet further. Properties easily identified. Gutted and critically deteriorated. They are everywhere and there are thousands. Left over from the ongoing GFC

        • Yoda says:

          > The answer is to heavily tax unoccupied real estate of course.

          That will never happen, because it makes too much sense and might actually work.

        • Dave Chapman says:

          Ah, no. If you start taxing unoccupied houses, this is what will happen:

          This was Victorville, California. I happened to drive through there about a year prior. It was surreal. There were all of these brand-new housing developments in the High Desert, and along the main road were a dozen sign-spinners trying to get you to come into the developer’s office and buy one of them.
          I did not stop. . .

  2. JZ says:

    This is good. I was convinced during the past 5 years that US asset will NOT go cheap before other country get slaughtered. Looks that condition is removed now so US asset CAN go cheap now.

  3. Mikey says:

    Chinese government owns all the land in the country. Plus a couple trillion and no elections plus surveilance state. Not going anywhere

    • Paulo says:

      Exactly. Plus chaos is strictly dealt with and outside enemies readily apparent. Interesting that the profits were quickly spirited away into outside RE before all this happened.

      Unfortunately, we live in a Global economy and while some individuals may fare better than others, when the sh%! hits the fan it will spread everywhere.

      But hey, Trade wars are easy to win, especially when they morph into real ‘shots fired’. If you back people into a corner, anything can happen. No one puts up with win/lose. It has to be win/win or the fight will never be over.

      Every country, from what I can see, is carrying way too much debt, including western countries. This has the potential to escalate, quickly.

      • MCH says:

        I think we could use a joint bad guy… too bad, they can’t use North Korea, beating up on fatty the third could be good for everyone. Heck, they could make that the theme of the new Top Gun movie.

        Too bad, there are too many interests in propping up NK.

    • MarkinSF says:

      “Chinese government owns all the land in the country”
      You could say that about any country. In the US you get a bundle of rights.

      • Steve in MO says:

        People just get 99 year, or perhaps shorter leases rather than a deed.
        Chinese Communist Party will end up the winner. They have a lot of options, but they don’t want to get rich, just to stay on top and prevent any unrest or disturbance that would cause instability and possibly threat to their power.
        They have let some people become very wealthy, but most people still live in what would be considered poverty in US and western European countries.
        Chinese Communist Party policy has been changed so very wealthy people can be party members.
        I think there are more billionaires in China than in the US.

  4. Bluetheimpala says:

    China is a fugazi. When Sino was goosed I told myself that until China grows up it isn’t a place to put my money. Maybe some change but nothing substantial. Has anything changed in 10 years? There are so many strings pulling china both internally and externally that I seriously question what sort of ‘global powerhouse’ it can be when it is an utter utter mess. Xi wants his silk road and has called in the capital but it looks like that will be used to prop up the next 10 years….sweet lord.

    • fastrock says:

      China has a large and growing middle class, yet it has a much, much larger, poor senior population, due to 1 child law. In light of their middle class, China does not want an economic/trade war with the USA. In a similar manner, the Chinese middle class does not want a military war with the USA. The 1989 Tienanmen Square protest established the rise of the middle class. The protest took the lives of thousands, prob 10s of thousands of China’s middle class.

      The protest made the case for power, mostly economic, that the middle class was willing to die for. IOW, the Old Guard has the political power, the middle class has the economic power and proved they are willing to die to keep the economy flowing. Their middle class does not want to return to the farms and poor villages.

      If the Old Guard screws up and escalates to war, trade or shooting that depresses, or God forbid, collapses their econ, then this could tear the country apart with the real possibility/probability of taking down the Old Guard. Note: the Old Guard is the CCP.

      I don’t and neither should you want the collapse of regular order in China. Others more knowledgeable about China could describe the likely scenario.

  5. robt says:

    There have also been some recent videos of riots by previous purchasers/speculators in China because of massive discounts by developers on unsold condos.
    A lot of the market in China was people buying raw-space units, never occupying them and never planning to, but just held as specs.
    Bubble and burst is just normal human behaviour throughout history.
    The alternative is a ‘managed’ economy where it’s always burst.

    • Paulo says:

      Like the Fed? Bailouts? Bankruptcy escape hatches? Hedge funds stripping perfectly good businesses? Changing labour laws? Political friends and insiders?

      Some economies are overtly managed, but all are obviously managed behind the scenes. All consequences ultimately rest on the common man’s shoulders. It is imperative for individuals to prepare for themselves and families and I am not talking about playing militia weekends and food stored in bunkers. If people have margin investments and lots of personal debt it may simply be too late, imho.

    • William Smith says:

      The cities in that article look like they were computer generated images by some 3D rendering engine. Just repeat a whole lot of the same building all over the place. You could use the open source Blender program to generate such images. But seriously: as a store of wealth? They must have land tax or council rates or body corporate fees or some type of ongoing expenses associated with those properties? And buildings do have a finite lifetime (40 years?) thus they would have to “realize” the value in 10 or so years before they start to look to old/dated against the newer offerings. In Sydney there have been a number of large apartment blocks which failed the fire code (firewall not going up to ceiling and bad/no sprinkler system) resulting in *very* costly repairs needed. So even in a (supposedly) properly regulated building code there have been huge failures. I suspect that the builders in china are far less interested in quality (as befits their philosophy of making cheap inferior crap) and have cut corners, as they weren’t building for actual tenants just ghosts, so that when occupants actually try to live in the buildings then all sorts of problems will emerge. This might be a magnificent housing/value explosion in the future: I can’t wait! I just love china so much….

      • roddy6667 says:

        In China there is no property tax. A new home is sold as a concrete shell that the builder finishes for another 20%. That’s how it is done. There are common area charges like security, external maintenance, elevators, cleaning, trash removal, outside and parking garage lighting, and other expenses. I live in a gated community in Qingdao, and all this costs me $25 US a month. Being made of steel-reinforced concrete, they need no more maintenance than a bridge abutment. The units above and below me stood empty for 5 years. Except for a few cobwebs and some dust, none the less for wear. They were completed and occupied this year. They could be held empty for 50 years.

        • Robert Hughes says:

          The length of time a structure “lasts” in a physical sense is a function of how much additional cost (money) was put in initially. As one example; standard rebar versus corrosion resistant rebar. There are literally hundreds of examples of these trade offs. The speed of their construction, desire of developer to sell out, lack of QA, bribes and so forth strongly indicate that in most trade off choices the decision is made to go with the low initial cost approach. Unfortunately poorly constructed concrete bridges can show severe wear and aging in only 10 years. Or as the recent case in Florida at the college collapse in only days after completion. Refer to several U tube videos of entire new medium rise condos that just fell over in China. So your comment regarding 50 years is very misleading. It would be worth an article by someone who could contrast and detail construction in US versus China as regards longevity.

  6. Timothy J McLean says:

    The stats presented in this article finally makes me feel good I never bought stock in Chinese companies. As Wolf has pointed out before on Alibaba, the Chinese companies never comply with GAAP accounting or follow SEC rules. The Chinese company’s goal is to bring money back to the leaders of China. This is still a command economy.

    • In America they just rewrite all the accounting rules to make it appear companies make much more than they actually do. The feeble-brained public is supposed to fall for this hook, line and sinker.

  7. KPL says:

    “Given the problems China is facing these days, authorities have likely more important things to do than keeping the stock market from going to heck entirely.”

    It remains to be seen for how long. Also when other markets (that are near ATHs) join the southbound party it remains to be seen whether the more important things become suddenly less important.

    The central bankers will hike till the market breaks. But what happens when market breaks remains to be seen. Also guys like Bullard will start talking more loudly when that happens. Also he probably gets voting rights in 2019. As it is he is lining up to become the next Fed.

    • And people think the U.S. stock market is rigged now? Can you imagine Bullard as the FED? Unleash the Bullard (Bullturd). Everyone will be sleeping on the sidewalk begging for change, malls closing and the unemployment rate in America nearing fifty percent and Bullard will make sure they rig the DOW index past the 100,000 mark.

  8. OutLookingIn says:

    It has been long recognized that global economic malaise, begins on the periphery and inevitably moves to the core.
    For more than a few years now, the peripheral has been suffering:
    The edges of the EU are unraveling.
    Latin America is disintegrating.
    The commodity nations have fallen hard.
    Venezuela is approaching failed nation status, as is South Africa.

    Reading too much into China’s current economic problems is a fool’s errand. The saving grace being the “one road/one belt” initiative that is fast becoming a reality. Between China, Russia, and India, they have 60% of the global population and control a similar amount of the globes GDP.

    The coming reset, or if you prefer ‘revaluation’, is moving closer to the center. It will assuredly cause some upheaval within the one road/one belt sphere, however nothing on the scale that the west will experience.

    • Crysangle says:

      Bolsonaro is just now being accused of electoral fraud in Brasil, by Haddad and other parties, after millions were said spent on Whatsapp campaign. Complaint is being filed and Haddad has said Bolsonaro should be disqualified, and the run off be between 2nd and 3rd place of first round. Others are saying that the country will not accept Bolsonaro, who seems to have the poll lead. This election (28th), or its result, is going to be trouble as far as I make out. :-(

    • Javert Chip says:


      Dude, your population & GDP numbers don’t come close to being accurate (all 2017 values):

      China, Russia, Indian population (1.386B, 0.145B, 1.339B) as % of 7.6B global total = 37.8%

      China, Russia, Indian GDP ($12.3T, 1.6T, 2.6T) as % of $78.3 global total = 21%

      Go back and make up another story.

    • Matt P says:

      They do not control anywhere near 60% of the global gdp. China 16%, India 3.25 and Russia 2, 21.25 total. The US alone has more than all 3 at 23.3%

      • Crysangle says:

        “The initiative aims to strengthen infrastructure, trade, and investment links between China and some 65 other countries that account collectively for over 30 percent of global GDP, 62 percent of population, and 75 percent of known energy reserves.”

        Are maybe the sort of figures OutLookingIn is drawing from…not that I am arguing either way.

        • OutLookingIn says:

          Yes. Thank you for the clarification.
          Too many shoot the messenger, then ignore the message.
          Like todays hit piece on China in the western financial media.
          Lamenting the “terrible” year-over-year growth number.
          The latest Y-o-Y growth did not meet expectations at 6.5%!
          Wow! Their economy only grew by 6.5% Y-o-Y!
          Meanwhile taking into account the fudging of statistics, that goes on everywhere, their growth rate is still head and shoulders above the west.
          The western empire must get used to the idea that it is no longer a uni-polar world. The new paradigm is multi-polar.

        • KMOUT says:

          Too many linear extrapolators for this adult to listen to.

          One of the greatest human (expensive) flaws known to the tragedy of the human condition.

  9. Many major US market events happen on Tuesdays, and most bad market selloffs on Tuesday begin the previous Thursday.

    • Escierto says:

      So today’s drop in the US market will result in a bloodbath next Tuesday? Nice. I keep waiting for this mother of all bubbles to explode killing every investor within range.

  10. Phi; says:

    The Red State will open their wallet when property loses 70% or more, imagine the amount of property going back to the State … and the lesson learnt that capitalism does not work!!

    … nearly 70% of the private wealth made in the Chinese boom is invested in their property market.

    Sound familiar????

  11. Kasadour says:

    How long have the Chinese been touting the $5 trillion Belt And Road Forum also known as BARF? They talk about how great it’s going to be, but have never actually published any BARF-related projects. Foreign investment into BARF is declining as well.

    • Mike G says:

      A lot of the recipient countries are having second thoughts about Chinese infrastructure investment. There are quality issues with construction, corruption issues and the money comes with a lot of hidden strings.

  12. Shawn says:

    The rot across the world is starting to collapse at the periphery and moving it’s way to the core, meaning us. You want more proof check out NVDA’s share price just 4 years ago and compare it to what it is now. About 16x higher, truely ridiculous.

    • Prairies says:

      When cryptocurrency gets rolled up and put away the NVDA value will normalize. Crypto was one of the many rotten money grabs of the current 10 year cycle. With all the political and economic tension around the globe the corrections are starting to show, people gotta cash out to pay off debts at some point.

      • JZ says:

        Come on, even Crupto gets completely killed, there is still AI, automatic driving. Their chips are better at certain computing tasks than Intel’s CPU. 16X justifies or NOT I don’t know. But NVDA is much more sound than Tsla.

  13. Satya Mardelli says:

    It seems odd that Chinese peer-to-peer lenders are doing IPOs in the U.S. and receiving buckets of $$$ from dumb-ass American “investors”.

    That money is gone forever…

    • MC01 says:

      Netflix spends a little over $1000/quarter to attract a new subscriber. The average subscription is around $8/month, meaning $96/year or $24/quarter.
      Compared to this business model, Chinese P2P lending seems a rather solid investment.

  14. Bruce Kowal says:

    “But now, many trillions of yuan in “hidden debt” are rolling out of the bamboo forest on off-balance-sheet vehicles. ” Good writing, Wolf! “…rolling out of the bamboo forest . . .” LOL.

    • ewmayer says:

      Wolf’s ‘bamboo forest’ line is indeed cute, but I was kinda hoping for an ‘investor-gamblers left feeling bamboozled!’ quip. :)

      [Yah, I know – tough crowd, aren’t we?]

  15. max says:

    “The China miracle was based on endless and mind-bending credit creation.”

    yes, they learn that keynes bulshitt in western universities.

    • Gandalf says:

      Specifically, I remember seeing a documentary about the 2008-2009 crash where Chinese officials were interviewed and gave credit to Henry Paulson, US Treasury Secretary, for all his advice on how to inflate their economy during the early stages of the crash. “We learned everything from you Mr. Paulson, tell us what what we should do now”, was a quote from one of them

  16. Marcus says:

    With the way things are going, and I think this will spread globally, I’m not sure that either US party should want to be in power over the next few years. The debt bubble is not sustainable. Look at unemployment over the past 50 years… note the way it slowly drops then quickly spikes… over and over again like clockwork. Look where we are now and guess where we are headed. Whoever is holding power will be blamed even though there’s nothing that anyone could do to stop it. IMHO

  17. LouisDeLaSmart says:

    This in my opinion is not a sign of weakness, but a sign China has embraced capitalism, the same system the US seems to be opting out of. Yes, a different kind of capitalism, but still capitalism. So, their bubbles pop very fast, and there is a change in peak intensity and a baseline shift…economies react and change, there is nothing wrong in the stock market variation. It’s normal. If you ask me it looks healthier then the US stock market, simply because it seems to be reflecting the real state of the Chinease economy (slowing down). Losing and allowing failure is part of finding the path in capitalism, it’s part of the learning curve. I don’t see a crisis here, more a change from fast growth to slower growth.

  18. SnotFroth says:

    Financial speculation? Real estate bubbles? Stock market turbulence? What part of China is still red besides the flag?

    If things get bad I vaguely expect the politburo to throw up their hands and exclaim “now you all see why capitalism and western models are corrupt.”

    No doubt money injections will ease some pain for the sake of social stability, but I wonder what Marx would say about a communist government bailing-out the bourgeoisie.

    Interesting times indeed…

  19. MCH says:

    And people are wondering why Chinese are in such a rush to move their money out of China into overpriced houses in Vancouver, New York, Sydney, and San Francisco.

    But everybody should relax, the Chinese middle class will save everyone. It is a massive force relied upon by all sorts of entities from the Chinese government to multinationals. All we have to do is to get market access to China’s middle class, get them to open up their wallets a little, and we’ll have an instant miracle. When that happens, the Shanghai and Shenzhen index will go through the roof and outpace every market in the world. The untapped potential of the Chinese middle class, that’s the common refrain after all, just consider how often has Tim Cook spoke about the importance of China on Apple’s conference call… It must be true. How many other CEOs on their conference calls say exactly the same thing.

    Except of course, the miracle might take a while to happen. Following link is to SCMP, the firsts on a set of four articles talking about the Chinese middle class, it’s an entertaining read for those expecting the Chinese middle class miracle.

  20. Unamused says:

    ->With all these things going on simultaneously, the implosion of the stock market is one of the smaller problems that authorities are grappling with

    You have no idea. And it’s not just China, and not just issues of finance and economics. The Global Situations Dashboard is lit up like a pinball machine and is making fizzing sounds and icky smells. After the upcoming US elections Events will occur in quick succession. It’s going to be a bumpy ride from here on out, so I’m getting off this roller coaster. It just doesn’t look safe, even from this distance. Forget I said anything about The Year of the Jackpot or triggering events.

    China has clearly shown that it can’t control it’s debt problems any more than England could with the South Sea bubble, the Dutch with the tulip mania, France with Law’s system, or the super-companies of Compagnia. Everybody gets their turn, I suppose.

    I think it’s interesting how practically all financial crashes, throughout history, starting with the panic in Rome in AD 33, are the result of improper control of credit and a disconnect between irrational financial exuberance and economic reality. It’s easy to see why: high finance is by its nature self-selecting for manic-depressive hoarder delinquents, who always have the money, and therefore the power, to fatally corrupt any system of controls regardless of construction, and always have the will. And yet they are always exalted just because they have money, when they ought to be quarantined out of sheer terror for what they’re about to do.

    • Ste says:

      I think China probably can control it’s debt problem, through what’s called the restless hand or active hand, different than the “hidden hand” in capitalistic societies. Chinese communist government, primarily a front for the Chinese communist party, will be able to exert pressure on bankers and lenders not to forclose, while banks in Western societies would foreclose and liquidate assets, the communists have a system of encouraging banks to roll over debt, never really calling it in. No one is in a position to argue with them.
      China is attempting to transition to a self sustaining domestic middle class economy, but hasn’t reached it yet. They plan to essentially bail everyone out.
      We’ll see if it is too big to fail, since the Chinese Communist Party is not going to allow it to fail.
      They will never go broke, and will make an offer to competitors and those in subservient positions that they can not refuse.

  21. Steve in MO says:

    The book by Dinny McMahon “China’s Great Wall of Debt” does describe the debt, likely over-extended debt that China is going through. He did make note of a phenomena that often occurs prior to a financial recession or depression, that a country or city will build the tallest building or skyscraper in the world. He said this goes back to 1874 when they were building a 14 story building in New York, and also that the Empire State Building was being built prior to the Great Depression.
    Now apparently, there are six enormous buildings going up in China, and I think one or some of them are not even in wealthy provinces but in a province that is comparatively poor.
    It’s not the building as such but the attitude that leads to it being built, that it has a attitude of everything going very well and the business climate is such that they can make money on high rent for high paying tenants for office space.
    So perhaps he did have an idea or observation that China might be headed for a recession or depression.
    Still, I think China may be able to manage the economy, since they have essentially total control and no one is able to argue with them if they tell a bank not to foreclose on loans, but to roll over the loans into new paper.
    While this might be sort of a ponzi scheme, or passing on loses to someone, the Chinese way is to pass the loses onto the banks and to bail out individual savers or investors and likely the banks will be bailed out in some way as well.

  22. Augusto says:

    Chinese citizens riot when their investments in property, shares or wealth management products go down for the count. They think the Free Market means everything goes up until they get rich. The Chinese government, like every other government in the world, has allowed this illusion to run wild. So a reckoning is coming, the only question is who will be sent to the gallows. In 2008 in the US, what 6 million foreclosures and say 20 million people on the street, to save the banks and the bankers bonuses-not to forget savers and the unemployed. Some how I think for China it will be about saving the party/government, but my impression is the citizenry there will fight back and not go lightly into the night or (back) on the street.

    • Gandalf says:

      A huge difference is that Chinese citizens don’t own guns or other weapons, and the Communist Party has already demonstrated its willingness to use army tanks on its citizens.

      So, rebel with what? Kitchen knives?

      The internal security monitoring of dissent is quite rigid, and punishment harsh and swift. Lots of small regional protesters have previously been rounded up and executed, something not reported in Western media

      I’m pretty sure the Communist Party will survive in China. China, like Japan, has built up reserves from its years of trade surpluses to cushion any debt bomb explosions

      I see the US economy as far more fragile, with a multi trillion dollar junk debt bomb, massive Federal debt, and a drug addict level of dependence on the willingness and ability of cheap labor countries like China to keep selling stuff to us cheaply in order to keep wage and durable goods inflation down

      A blowup in China will disrupt the US economy, for sure.

  23. NotBuying says:

    Is this a good buying opportunity for international investment or do you see further decline?

    I have reallocated my 401k to 99% US Stocks, but I am wondering if I should go back to 70-30% US/Int’l split now that Int’l stocks have been doing so poorly.

    Are there any indicators of a turnaround?

    • Dave Chapman says:

      My reading is that we are in the early stages of a global dollar shortage. Symptoms will begin in the next 3 months.

      The most likely outcome is a global recession which affects everybody except the USA.
      The second most likely outcome is a global recession which affects everybody.

  24. Larry says:

    Wolf, I am puzzled. I follow emerging markets pretty closely. A long term chart of FXI or any other Chinese market is in serious draw-down but nowhere near as extreme as shown in your long term chart. My best guess is your charts are denominated in Renminbi and the others are all in dollars. Any thoughts?

    • Wolf Richter says:

      Yes, these charts of the Shanghai stock exchange are based on stocks that are denominated in renminbi, as they should be. The entire Shanghai Stock Exchange (SSE) index is based on stocks that are denominated in renminbi. This is the SSE data reported in the US every day. It’s like the Nikkei, which is based on stocks that are denominated in yen, or the S&P 500 which is based on stocks that are denominated in USD, or the DAX which is based on stocks that are denominated in EUR.

      It’s only when you have a collapsing currency, like the ARS or the TRY that you’d want a chart that has been converted into hard currency, though the underlying stocks are denominated in local currency.

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