China Stock Market - China's Fever Rising

In 1930 Shanghai was regarded as the Paris of the Orient.  Rich and poor alike flocked to the city to participate in its beauty, excitement, and economic prosperity.

These days millions are flocking to Shanghai but for very different reasons, the stock market.  I’ve been watching the international markets for some time, and just a few days ago I noticed that the Shanghai Index was nearing a mythical 4,000 mark.

Now, in general, I support markets moving upwards but this is getting frightening.  A few quick facts to put the fear of China into you as well:

• The Index closed just the other day at 3,950, shy by just 50 points of the 4,000 mark.

• The index is up 24% since the end of March.

• The index is up 48% since the beginning of the year.

• The index is up 240% in the last 2 years.

• More than 10 million new retail stock trading accounts have been opened this year . . . yes this year, we are less than 6 months in.

• The last time the market crossed an important milestone (3,000) the market stumbled 8% the very next day.
  

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Apparently, I’m not the only person concerned about the markets.  The Chinese market itself has started increasing minimum margin levels and limiting contract purchases for individuals.  Hold on to your hats, a rollercoaster ride is not too far away.

•  The energy market continued to push higher this week on a series of upgrades from investment banks including: Reliant Energy (RRI) by Citigroup and Matrix Research, Integrys Energy (TEG) by JP Morgan, Eagle Rock Energy (EROC) by Wachovia and Pacific Ethanol (PEIX) that was upgraded from a sell by WR Hambrecht.

•  Amgen (AMGN) was downgraded by, it seems, every living research analyst on the planet this week.  Of course, this was all AFTER the FDA announced the call for further restrictions on the use of anemia drugs by both Amgen and J&J.

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