China’s “Healing” Equity Markets: The New World Market Leader?

Despite the overload of streaming bad news and pessimism, few have noticed that prior to the “recovery” or “bounce” (depending on the bias of the observer) in the US markets, China’s market has been gradually stabilizing.

courtesy of stockcharts.com

The red arrow shows China’s Shanghai index in a seeming recovery mode (from late October) even as the US S&P have touched a milestone low (blue arrow) in mid November.

To consider, during the advent of today’s bear market, China’s Shanghai index have turned lower almost simultaneously with other Asian benchmarks despite the limited exposure to foreign investors.

And to further allude that China’s Shanghai has suffered the most pain compared to the neighbors after losses tallied to 70% at its nadir.

While it is arguable that today’s recovery may simply be representative of a mere bounce, technical picture appears to indicate otherwise.

The Shanghai composite has broken the bearish year-to-date trend line (pink) aside from the 50-day moving averages (blue) which may point to a segueing to the market cycle process known as a “bottom”.

Of course since today’s global trade structure has put a lot of weight into China…

Courtesy of nationmaster.com

China could signify as a huge driver in shaping the global economy and markets.

And as the region increasingly integrates, this probably would imply for a regional recovery.

So we should probably keep watch with some of the key Asian indices as Japan’s Nikkei. Japan's major benchmark appears to be on its way to test its resistance levels at 9,500 and the 50 day moving averages to corroborate China’s seeming transitioning phase.

And because China in the recent past had accounted for an important consumer for commodities, then we might also add that for China’s bottoming process to be further confirmed, we need to see an equivalent turn in commodity prices as in copper, oil and other base metals, something that has, as of the moment, been missing.

Will China lead the next phase of the market cycle?

Stay tuned.

Globalization Highlights From Past To Present

The historical contribution of Globalization to world economy, from the Economist,

``GLOBALISATION, as historians of the subject like to point out, has been around for a long time. Industrialisation and technological changes—such as the invention of the steam ship, which produced cheaper means of migrating and trading between continents—spurred one period of globalisation in the 19th century. In similar fashion new inventions—jet aircraft, the internet—helped to encourage later periods of it. In a new World Trade Report published this week, the WTO compared three broad periods, looking at global growth in GDP, in population and in the trade of goods. Migration rates are shown only for four countries of the “New” world.

courtesy of the Economist

Present Trends as Indicated by the WTO 2008 World Trade Report

Accelerating world economic growth…

Rising Per Capita…

And broad based Poverty Alleviation…

This from WTO (highlight mine)…

“International trade is integral to the process of globalization. Over many years, governments in most countries have increasingly opened their economies to international trade, whether through the multilateral trading system, increased regional cooperation or as part of domestic reform programmes. Trade and globalization more generally have brought enormous benefits to many countries and citizens. Trade has allowed nations to benefit from specialization and economies to produce at a more efficient scale. It has raised productivity, supported the spread of knowledge and new technologies, and enriched the range of choices available to consumers. But deeper integration into the world economy has not always proved popular, nor have the benefits of trade and globalization necessarily reached all sections of society.”

Unfortunately globalization trends, despite its tremendous advantages, are highly unappreciated or unpopular simply because it is imperfect. But much of these has been borne out of the market distorting policies.

The message is the world needs more trade than relying too much from government.