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Have commodities hit the BRIC wall of China? Shanghai has been one of the only markets to continue rallying even after US, European, and fellow Asian markets retraced their impressive gains. (Note: this post is best reviewed in relation to the next post: "Mid-July Look at BRIC equities").
Indeed, the other BRICs (Brazil, Russia, and India) have already seen sharp to medium drops in profit taking among traders.
Questions continue to be raised about the sustainability of Chinese equities - especially when IPOs are oversubscribed by a ratio of several hundred percent, exports are slowing, internal unrest is growing (see the Uighur riots), and manufacturing jobs disappearing.
Indeed, the Chinese equity boom is based on A LOT of leverage. Simply put, there is a MASSIVE liquidity drain going on in the Chinese system - they make Greenspan look like a little boy.
http://ftalphaville.ft.com/blog/2009/07/09/
61171/quantitative-tightening/
It looks like the Chinese authorities are setting themselves up for an epic drop sometime in the future.
Sources:
ZH does a great job of covering the Chinese fundamentals in this and other older articles:
http://zerohedge.blogspot.com/2009/07/
continued-commentary-on-china.html
The Professor is on point as always:
http://mpettis.com/2009/07/rmb-15-trillion-in-new-
chinese-lending-can-we-turn-this-thing-off/
