The stagnation of Chinese economy threatens with decrease in the world prices for oil and metals
28 February 2007On February, 27th the world stock markets have tested significant correction, and the basic impact was taken up by developing markets. The reason of a panic was the maximal for last 10 years a collapse of the Chinese stock indexes. Shanghai and Shenzhen 300 Index has fallen to 9, 2 % on a background of expectations of toughening of regulation of the financial markets and monetary policy of the country.
The Chinese government has approved the creation of the special commission on struggle against illegal investments into actions against the purpose of prevention of market overheat. The analysts consider that the danger of financial bubble has logically appeared: for the last half a year the Chinese stock indexes have flied up twice, the attitude of capitalization to profit (P/E) has exceeded 30. In 2006 US 11, 2 billion dollars or 50 % of pure inflow of the global investors in funds of actions of developing markets capital, has been concentrated in China.
Recently, the chief of Federal service on the financial markets, making comments on attraction of means of the population on the share market, has warned against “the Chinese syndrome” - when people sold apartments, removed money from deposits and got into debts to buy stocks. Besides the national bank of China since February, 25th, 2007 in fifth time since July of the last year has raised the rate of deductions in fund of obligatory reserves (FOR) - up to 10 %, and a number of experts predicts still triple increase of the specification of reservation up to the end 2007 the Country leaders tries to avoid an overheat of economy, however while rates of growth of gross national product of China exceed 10 % and in 2007 the World bank predicts stagnation up to 9,6 %.
The situation in the Chinese economy and in the stock market is reflected in the global financial markets. Actually, the stagnation of Chinese economy can reduce demand for the raw goods that threatens with decrease in the world prices for oil and metals. The second risk factor consists in the general deterioration of the attitude of investors to risks of developing markets, as owing to sharp falling of the Chinese stock market (China and Russia were recently considered by many global investors within the limits of the common BRIC brand), and because of increase of geopolitical risks (many investors prefer to wait such periods in the most conservative financial tools). However this can be an ordinary correction of the Chinese stock market after excessive growth and a measure on of overheat restriction, undertaken by the government, should improve the present situation.
- A new tendency of the world oil market
- The gold price has not been so high almost for a year
- WTO: world trade growth can decrease up to 6 % in 2007
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