China’s already battered stock markets could tumble further against a darkening economic backdrop ahead of August’s Olympics Games, as the U.S. recession begins to take its toll and China further tightens its monetary policies to combat runaway inflation. After quintupling in just two years, China’s benchmark Shanghai Composite Index has plunged 40% since peaking at an all-time high in October, confounding the expectations of investors who expected the remarkable run to continue through the Games. Troubles in the domestic economy and as well as the international credit crisis weighed on markets, and those troubles are not likely to disappear even after the Olympics, analysts said.
While the ongoing unrest in Tibet is unlikely to have much of an impact on the Olympics, the stock market or the economy at large, turmoil never sends a comforting welcome signal to investors, especially when a market is already under pressure.
However, people in China mainland are still hoping the stock market will come back or even rise to a higher record because of the Summer Olympics. But analysts in the U.S. don’t agree with the positive opinions on China’s stock market, and think winning in China’s complicated race is very challenging. From MarketWatch.com :
As Chinese stocks face both global and domestic economic challenges, sorting out the winners from the losers has gotten more complicated — with a few obvious exceptions in sectors that should get a lift from the Summer Olympic Games.
“Six or ten months ago, you couldn’t find anyone who would say anything bad about China. Today, you can’t find a good word,” said Robert Lutts, president and chief investment officer at Cabot Money Management, an independent wealth management firm based in Salem, Mass.
Lutts was MarketWatch’s Stockpicker of the Year for 2007, on the strength of three Chinese stocks he recommended in an interview last July. Although he remains optimistic overall and he still holds some Chinese shares, he is sanguine about the overall investment climate there in the near term.